Answer:
1. Current ratio = Current assets
Current liabilities
1.25 = Current assets
$415,000
Current assets = 1.25 x $415,000
Current assets = $518,759
2. Quick ratio= Current assets - Inventory
Current liabilities
0.79 = $518,750 - Inventory
$415,000
0.79 x $415,000 = $518,750 - Inventory
$327,850 = $518,750 - Inventory
Inventory = $518,750 - $327,850
Inventory = $190,900
3. Inventory turnover = Cost of goods sold
Inventory
9.5 = Cost of goods sold
$190,900
Cost of goods sold = 9.5 x $190,900
Cost of goods sold = $1,813,550
Explanation:
In the first instance, there is need to apply the formula of current ratio in which current ratio and current assets have been given with the exception of current assets. Therefore, current asset is made the subject of the formula.
In the second case, we will apply the formula of quick ratio, where quick ratio, current assets and current liabilities were known except the inventory. Inventory becomes the subject of the formula.
Finally, we will apply the formula of inventory turnover, where inventory and inventory turnover were known, cost of goods sold is made the subject of the formula.
