Question 3 of 47intermediate🔧 ApplyNumerical3 marks

Current ratio = 4.5:1, quick ratio = 3:1. Inventory is Rs. 36,000. Calculate the current assets and current liabilities.

Correct Answer

Current Liabilities = Rs. 24,000; Current Assets = Rs. 1,08,000

Exercise: Do it Yourself | Q: 2 | (Page 10)
For More Understanding

Explanation

The solution follows the algebraic method demonstrated in the provided context. By letting Current Liabilities be 'x', Current Assets and Quick Assets can be expressed in terms of 'x' using the given ratios. The difference between Current Assets and Quick Assets represents Inventory, which allows us to solve for 'x'. The final figures match the answer key provided in the text (Current Assets Rs. 1,08,000, Current Liabilities Rs. 24,000).

Solution Steps

  1. Step 1: Let Current Liabilities = x

  2. Step 2: Calculate Current Assets and Quick Assets in terms of x. Current Assets = 4.5x (since Current Ratio is 4.5:1) Quick Assets = 3x (since Quick Ratio is 3:1)

  3. Step 3: Establish the relationship using Inventory. Inventory = Current Assets – Quick Assets 36,000 = 4.5x – 3x 36,000 = 1.5x

  4. Step 4: Solve for Current Liabilities (x). x = 36,000 / 1.5 Current Liabilities = Rs. 24,000

  5. Step 5: Calculate Current Assets. Current Assets = 4.5 * 24,000 Current Assets = Rs. 1,08,000

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