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Question: Use the information in the adjusted trial balance presented below to calculate the current ratio for WickUse the information in the adjusted trial balance presented below to calculate current RATIO for Wicked Wicker Company:
Account Title Dr. Cr.
Cash $ 26,000
Accounts receivable 17,000
Prepaid insurance 7,000
Equipment 110,000
Accumulated depreciation—
Equipment $ 55,000
Land 96,000
Accounts payable 18,000
Interest payable 2,650
Unearned revenue 5,300
Long-term notes payable 33,000
Retained earnings 142,050
Totals $ 256,000 $ 256,000

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The current ratio for Wick Firm equals 0.85.

What is a current ratio?

This is a financial tool that measures a firm's ability to pay short-term obligations that are due within one year.

The current ratio is calculated by dividing the company's current assets by its current liabilities.

Current ratio = Current assets / Current liabilities

Current ratio = (Cash + Accounts receivable + Prepaid insurance) /  (Accounts payable + Interest payable + Unearned revenue + Notes payable)

Current ratio = ($26,000 + $17,000 + $7,000) / ($18,000 + $2,650 + $5,300 + $33,000)

Current ratio = $50,000 / $58,950

Current ratio = 0.848176421

Current ratio = 0.85.

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