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PRACTICAL ASSIGNMENTS

Q1: from the following calculate the current ratio:

Particulars Note no. Figures from the

current year
1. Equity and Liabilities:
a. Shareholder’s funds
Share capital: 21000
b. Reserves and surplus
Surplus: 2500
Reserve : 1500
c. Current liabilities
Bank Overdraft: 2000
Trade payable: 6000
33000
2. Asserts
a. Non-current asserts
Fixed asserts 17000
b. Current asserts
Inventories: 6200
Trade receivable: 3200
Input CGST: 1500
Output SGST: 1500
Cash : 3600
33000

Sol: Here current asserts= 6200+3200+1500+1500+3600= 16000

Current liabilities= 2000+6000= 8000

Current Assets
Current ratio =
Current liabilities

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16000
CR = = 2: 1
8000
Q2. Calculate the current ratio from the following information:

Particular Amount Particular Amount

Total assets 250000 Long term liabilities 50000
Fixed Assets 100000 Investment 100000
Share holders funds 175000

Sol: Here Total assets = fixed assets + Investments + Current asset

Current asserts= 250000-100000-100000= 50000

Total liabilities= share holders funds + long term liabilities+ current liabilities

Current liabilities= 250000-175000-50000= 25000

Current Assets
Current ratio =
Current liabilities
50000
CR = = 2: 1
25000
Q3: Find out current ratio:

Trade receivable=33000; provision for bad debts=3000; stock twice of net

debtors; cash in hand=16000; advance to suppliers=15000; trade payable=
35000; outstanding expenses=15000; prepaid expenses= 5000;
investment=12000;

Sol:

Current assets= 33000+60000+16000+15000+5000=126000

Current liabilities= 35000+15000=50000

Current Assets
Current ratio =
Current liabilities

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126000
CR = = 2.52: 1
50000
Q4: Calculate current ratio:

Cash in hand 8000

Inventories 9000
Trade receivables 11000
Tools 15000
Computers 30000
Bills receivable 6000
Sundry payment to workers 7000
Overdraft 10000
Sol:

Current assets= 8000+ 9000+ 11000+6000=34000

Current liabilities= 7000+10000=17000

Current Assets
Current ratio =
Current liabilities
34000
CR = =2∶1
17000
Q5: Calculate current ratio:

Total assets 600000

Fixed assets 300000
Capital employed 450000
Sol:

Current assets= total assets – fixed assets= 600000-300000=300000

Current liabilities= total assets-capital employed= 600000-450000=150000

Current Assets
Current ratio =
Current liabilities

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300000
CR = =2∶1
150000
Q6: Current ratio of company is 3:1 and working capital is 100000.
Calculate of current assets and current liabilities.

Sol: let current assets= 3x; current liabilities= 1x then

Working capital = current assets – current liabilities

100000 = 3x -1x

2x = 100000

x = 100000/2

x= 50000

∴ Current assets=3 x 50000 = 150000

Current liabilities = 1 x 50000 = 50000

Q7: Current assets= 2000000; stock = 800000; working capital = 1300000.

Calculate current ratio

Sol: working capital = current assets – current liabilities

Current liabilities = current assets – working capital

∴ Current liabilities = 2000000 – 1300000 = 700000

Current Assets
Current ratio =
Current liabilities
2000000 20
CR = = or 2.85 ∶ 1
700000 7
Q8: Find out current liabilities when current ratio is 2:1 and current assets
are 100000

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Sol:
Current Assets
Current ratio =
Current liabilities
2 100000
=
1 current liabilities
100000
or current liabilties =
2
∴ current liabilties = 50000

Q10: from the following, compute the current ratio and quick ratio. Trade
receivable 200000; prepaid expenses 20000; cash 60000; marketable
securities 40000; machinery 10000; expenses payable 80000; trade payable
120000; debentures 400000; inventories 800000;

Sol:

Current assets= 200000+ 20000+ 60000+40000 + 80000=400000

Current liabilities= 120000+80000=200000

Current Assets
Current ratio =
Current liabilities
400000
CR = =2∶1
200000
Also Quick assets = current assets – prepaid expenses- stocks or inventories

Quick assets = 400000 – 20000 – 80000 = 300000

quick assets
Quick ratio =
current liabilities
300000
QR = = 1.5: 1
200000

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Q11: Following is the balance sheet of crescent chemical works limited as

on 31st march 2018

Particulars Note no. Figures from the

current year
3. Equity and Liabilities:
a. Shareholder’s funds
6% preference share capital: 15000
Equity share capital: 55000
b. Reserves and surplus
General reserve: 25000
Reserve for contingencies: 10000
c. Non-Current liabilities
6% Mortgage Debentures: 25000
d. Current liabilities
Trade payable: 11000
Outstanding expenses: 2000
Output IGST: 2000
Output CGST: 2500
Output SGST: 2500
150000
4. Asserts
a. Non-current asserts
Land and building 20000
Plant and machinery 22000
Furniture and fixtures 3000
b. Current asserts
Inventories: 50000
Trade receivable: 30000
Trade investments: 5000
Prepaid expenses: 2000
Cash at bank : 18000
150000

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Sol: Current assets = inventories + trade receivable+ trade investments+

prepaid expenses + cash & bank

Current assets = 50000+ 30000+ 5000+ 2000+ 18000 = 105000

Current liabilities = trade payable+ outstanding expenses+ output IGST +

output CGST + output SGST

Current liabilities = 11000 + 2000+2000+2500+2500=20000

Current assets
Current ratio =
current liabilities
105000
CR = = 5.25: 1
20000
Also Quick assets= trade receivable + trade investments + cash & bank

Quick assets = 30000 + 5000 + 18000 = 53000

Quick assets
Acid test ratio =
current liabilities
53000
Acid test ratio = = 2.65: 1
20000
Q12. Following is the balance sheet of XYZ ltd as on 31st march, 2018,
calculate current ratio and liquidity ratio

Balance sheet

Particulars Note no. Figures from the

current year
1. Equity and Liabilities:
a. Shareholder’s funds
Equity share capital 24000 @ 10: 24000
b. Reserves and surplus
Profit and loss 6000
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c. Non-Current liabilities
10% Debentures: 15000
d. Current liabilities
Trade payable: 23400
Provision for tax: 600
69000
2. Asserts
a. Non-current asserts
Machinery and equipment 45000
b. Current asserts
Inventories: 12000
Trade receivable: 9000
Prepaid expenses: 720
Cash at bank : 2280
69000

Sol:

Current assets = inventories + trade receivable + prepaid expenses + cash &

bank

Current assets = 12000+ 9000+ 2280+ 720 = 24000

Current liabilities = trade payable+ provision for taxation

Current liabilities = 23400+600=24000

Current assets
Current ratio =
current liabilities
24000
CR = = 1: 1
24000
Also Quick assets= current assets- inventory – prepaid exp.

Quick assets = 24000 - 12000 - 720 = 11280

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Quick assets
Acid test ratio =
current liabilities
11280
Acid test ratio = = 0.47: 1
24000
Both the condition is not satisfactory

Q13. If current ratio is 2:1, Acid test ratio is 0.5:1 and current liabilities are
200000. Find out current assets, Quick assets and inventory

Sol:
Current assets
Current ratio =
current liabilities
2 current assets
or =
1 200000
or current assets = 2 × 200000

or current assets = 400000

Quick assets
Quick ratio =
current liabilities
0.5 Quick assets
or =
1 200000
or Quick assets = 200000 × 0.5

or Quick assets = 100000

Inventory = current assets − Quick Assets

Inevntory = 300000 − 200000 = 100000

Q14. Current asset is 300000, current ratio is 3:1 and liquid ratio is 2:1 find
the current liabilities, liquid assets and inventory.

Sol:

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Current assets
Current ratio =
current liabilities
3 300000
or =
1 current liabilities
1
or current liabilities = × 300000
3
or current liabilities = 100000
Quick assets
Quick ratio =
current liabilities
2 Quick assets
or =
1 100000
or Quick assets = 100000 × 2

or Quick assets = 200000

Inventory = current assets − Quick Assets

Inevntory = 300000 − 200000 = 100000

Q15. A ltd has current ratio 3.5:1 and acid test ratio of 2:1. If the inventory
is 30000. Find out its total current assets and total current liabilities.

Sol:
Current assets
Current ratio = … … … . (1)
current liabilities
3.5 current assets
or =
1 current liabilities
Quick assets
Quick ratio = …………….. 2
current liabilities
Dividing 1 by 2
current ratio current assets
∴ =
Quick ratio Quick assets

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3.5 current assets

or =
2 Quick assets
∴ 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑠𝑡𝑠 = 3.5 𝑥 𝑎𝑛𝑑 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 = 2𝑥

Inventory = current assets – quick assets

300000 = 3.5x – 2x

Or 1.5 x = 300000

Or x = 20000

∴ current assets = 3.5 x 20000=70000 and current liabilities = 20000

Q16. Quick ratio is 1.5:1, current assets are 100000, and current liabilities
are 40000. Calculate the value of stock.

Sol:
Current assets
Current ratio =
current liabilities
100000
CR = = 2.5: 1
40000
Quick assets
Also Quick ratio =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
1.5 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠
𝑜𝑟 =
1 40000
𝑜𝑟 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 = 1.5 × 40000 = 60000

Also inventory = 100000-60000

Inventory = 40000

Q17. Calculate revised current ratio. If

Current ratio 2:1

Current liabilities 100000
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Long term debt 150000

Trade payable paid 20000
Long term debt paid 30000
Received cash paid from trade receivables 40000
Sol:
Current assets
Current ratio =
current liabilities
Current assets 2
=
100000 1
or current assets = 200000

Also current assets = 200000-20000-30000=150000

And current liabilities = 100000-20000=80000

150000
Current ratio = = 1.875: 1
80000
Q18. A firm has a current ratio of 3: 1 its net working capital is 200000. You
are required to determine

(i) Current assets, (ii) current liabilities and (iii) liquid assets assuming
inventory is 220000

Sol:

Let current assets =3x and current liabilities = 1x; then

Working capital = current assets - current liabilities

200000 = 3x – 1x

2x = 200000 or x= 100000

Current assets = 3 x 100000 = 300000

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Current liabilities = 1 x 100000 = 100000

Also inventory = current assets – quick assets

220000 = 300000- quick assets

Quick assets or liquid assets = 300000-220000 = 80000

Q19. A business has a current ratio of 3:1 its net working capital is 400000
and its stocks are valued at 250000. Calculate quick ratio.

Sol: Let current assets =3x and current liabilities = 1x; then

Working capital = current assets - current liabilities

400000 = 3x – 1x

2x = 400000 or x= 200000

Current assets = 3 x 200000 = 600000

Current liabilities = 1 x 200000 = 200000

Also inventory = current assets – quick assets

250000 = 600000- quick assets

or quick assets = 600000-250000 = 350000

Quick assets
Also Quick ratio =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
350000
𝑄𝑅 = = 7: 4
200000
Q20. A ltd has a current ratio of 3: 1 and liquidity ratio of 2: 1. If its
merchandise inventory is 30000. Find out the total current liabilities.

Sol.
Current assets
Current ratio = … … … . (1)
current liabilities

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3 current assets
or =
1 current liabilities
Quick assets
Quick ratio or liquidity ratio = …………….. 2
current liabilities
Dividing 1 by 2
current ratio current assets
∴ =
liquidity ratio Quick assets
3 current assets
or =
2 Quick assets
∴ 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑠𝑡𝑠 = 3 𝑥 𝑎𝑛𝑑 𝑞𝑢𝑖𝑐𝑘 𝑎𝑠𝑠𝑒𝑡𝑠 = 2𝑥

Inventory = current assets – quick assets

300000 = 3x – 2x

Or 1 x = 300000

∴ Current assets = 3 x 30000=90000 and current liabilities = 30000

Q21. Given current ratio 2.8:1, acid test ratio 1.5:1 working capital is
162000. Find out current assets, current liabilities and liquid assets.

Sol: Let current assets =2.8x and current liabilities = 1x; then

Working capital = current assets - current liabilities

162000 = 2.8x – 1x

1.8x = 162000 or x= 162000/1.8 = 90000

Current assets = 2.8 x 90000 = 252000

Current liabilities = 1 x 90000 = 90000

Quick assets or liquid assets
Also Quick ratio or acid test ratio =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

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𝑙𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 1.5

=
90000 1
𝑜𝑟 𝑙𝑖𝑞𝑢𝑖𝑑 𝑎𝑠𝑠𝑒𝑡𝑠 = 1.5 × 90000 = 135000

Q22. From the following calculate the debt equity ratio.

Equity share capital 100000

General reserve 55000
10% debenture 50000
Current liabilities 50000
Preliminary expenses 5000
Sol. Total long term debts = debentures = 50000

Shareholders funds = equity share capital + general reserve – preliminary

expense = 100000+55000-5000= 150000
debt 50000
∴ debt equity ratio = = = 1: 3
shareholder funds 150000
Q23. From the following, calculate debt equity ratio, if Equity share capital
is 150000, preference share capital is 50000, general reserves is 100000,
accumulated profits is 60000, debenture is 150000, trade payable is 80000,
expenses payable is 20000 and Preliminary expenses not yet written off
10000.

Sol. Total long term debts = debentures = 150000

Shareholders funds = equity share capital + preference share capital + general

reserve + accumulated profits– preliminary expense

Shareholders fund= 150000+50000+100000+60000-10000= 350000

debt 150000
∴ debt equity ratio = = = 3: 7
shareholder funds 350000

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