Question

Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie Roll. (Round your answers to the nearest hundredth.)

Assets Liabilities;

Current assets:

Cash and cash equivalents (Note 1)

$

4,364,190

Investments (Note 1)

32,673,769

Accounts receivable, less allowances of $762,000 and $758,000

16,346,648

Inventories (Note 1

Finished goods and work in progress

12,790,955

Raw materials and supplies

10,415,858

Prepaid expenses		2,177,710

Current liabilities:

Notes payable to banks

$

532,221

Accounts payable

6,864,075

Dividends payable

436,607

Accrued liabilities (Note 5)

9,686,534

Income taxes payable

4,331,429

Current ratio	?
Quick ratio	?

Answer 1

	WORKING NOTES:
		Current Assets:
		Cash and cash equivalent	$               43,64,190
		Investments	$           3,26,73,769
		Account receivable less allwances	$           1,63,46,648
		Inventories:
		Finished Goods and work in progress	$           1,27,90,955
		Raw material and supplies	$           1,04,15,858
		Prepaid expenses	$               21,77,710
		Total Current Assets	$           7,87,69,130
		Quick Assets = Total Current Assets - Inventories - Prepaid Expenses
		Total Current Assets =	$           7,87,69,130
		Less:
		Finished Goods and work in progress	$           1,27,90,955
		Raw material and supplies	$           1,04,15,858
		Prepaid expenses	$               21,77,710
		Quick Assets =	$           5,33,84,607
		Current Liabilities :
		Notes payable to banks	$                 5,32,221
		Accounts payable	$               68,64,075
		Dividends payable	$                 4,36,607
		Accrued liabilities	$               96,86,534
		Income taxes payable	$               43,31,429
		Total Liabilities	$           2,18,50,866
	SOLUTION: 1
		Current Ratio = Current Assets / Current Liabilities
		Current Ratio =
		Current Assets =	$           7,87,69,130
		Divide by	"/" By
		Current Liabilities	$           2,18,50,866
		Current Ratio =	3.60
		Answer = 3.60
	SOLUTION: 2
		Quick Ratio = Quick Assets / Current Liabilities
		Quick Ratio =
		Current Assets =	$           5,33,84,607
		Divide by	"/" By
		Current Liabilities	$           2,18,50,866
		Current Ratio =	2.44
		Answer = 2.44