information from greg company s balance sheet follows current a 253096

Information from Greg Company’s balance sheet follows:

Current assets:

Cash ………………………………………………….$ 2,100,000

Marketable securities ………………………………… 7,200,000

Accounts receivable ………………………………….. 50,500,000

Inventories …………………………………………… 65,000,000

Prepaid expenses …………………………………….. 1,000,000

Total current assets ………………………………….. $125,800,000

Current liabilities:

Notes payable …………………………………………$ 1,400,000

Accounts payable …………………………………….. 18,000,000

Accrued expenses ……………………………………. 11,000,000

Income taxes payable ………………………………… 600,000

Payments due within one year on long-term debt …… 3,000,000

Total current liabilities ……………………………….. $ 34,000,000

Required

Answer the following multiple-choice questions:

a. What is the acid-test ratio for Greg Company?

1. 1.60

2. 1.76

3. 1.90

4. 2.20

b. What is the effect of the collection of accounts receivable on the current ratio and net working capital, respectively?

Current Ratio Net Working Capital

1. No effect No effect

2. IncreaseIncrease

3. Increase No effect

4. No effect Increase

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