Given an acid test ratio of 2.0, current assets of $5,000, and inventory of $2,000, the value of
current liabilities is
The acid test or quick ratio equals the ratio of the quick assets
(cash, net accounts receivable, and marketable securities) divided by current liabilities.
Current assets equal the quick assets plus inventory and prepaid expenses. This question
assumes that the entity has no prepaid expenses. Given current assets of $5,000, inventory
of $2,000, and no prepaid expenses, the quick assets must be $3,000. Because the acid test
ratio is 2.0, the quick assets are double the current liabilities. Current liabilities therefore
are equal to $1,500 ($3,000 quick assets ÷ 2.0).