Acid-test Ratio: The acid-test ratio is that ratio which determines the liquidity position of a company. This ratio is the measure of the ability of a business which it meets with the help of its liquid assets. This ratio is also called as the quick ratio or the liquidity ratio . The acid-test ratio.

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Chapter 4, Problem 4MCQ

To determine

Acid-test Ratio:

The acid-test ratio is that ratio which determines the liquidity position of a company. This ratio is the measure of the ability of a business which it meets with the help of its liquid assets. This ratio is also called as the quick ratio or the liquidity ratio.

The acid-test ratio.

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The following data were selected from the records of Fluwars Company for the year ended December 31, current year: Balances at January 1, current year: Accounts receivable (various customers) $ 111,500 Allowance for doubtful accounts 11,200 The company sold merchandise for cash and on open account with credit terms 1/10, n/30, without a right of return. The following transactions occurred during the current year: Sold merchandise for cash, $252,000. Sold merchandise to Abbey Corp; invoice amount, $36,000. Sold merchandise to Brown Company; invoice amount, $47,600. Abbey paid the invoice in (b) within the discount period. Sold merchandise to Cavendish Inc.; invoice amount, $50,000. Collected $113,100 cash from customers for credit sales made during the year, all within the discount periods. Brown paid its account in full within the discount period. Sold merchandise to Decca Corporation; invoice amount, $42,400. Cavendish paid its account in full after the…