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WAEC Financial Accounting 2001 Question 45

Question 45

Interpretation of Accounts

Sales N200,000
Opening Stock N20,000
Purchases N140,000
Closing Stock N10,000
Expenses N10,000
Bank N10,000
Capital N85,000
Creditors N35,000
Debtors N50,000
Fixtures and fittings, cost N10,000
Freehold land and building N70,000
Drawings N10,000
Acid test ratio is

  1. A.1.8:1
  2. B.1.7:1
  3. C.1.4:1
  4. D.1.2:1.
Show the answer and explanation

Answer: B (1.7:1)

Explanation

(Debtors 50,000 + bank 10,000) ÷ creditors 35,000 = 1.7 : 1.