Question 1

Vertex Corp. has the following current assets and liabilities at year-end:
- Cash: $85,000
- Accounts receivable (net): $240,000
- Inventory: $180,000
- Prepaid expenses: $25,000
- Accounts payable: $150,000
- Accrued liabilities: $80,000
- Current portion of long-term debt: $100,000

What is Vertex Corp.'s current ratio?

Accepted Answer

Calculate current ratio as total current assets divided by total current liabilities. Include all assets expected to be converted to cash within one year and all liabilities due within one year.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Omitting prepaid expenses from current assets, forgetting current portion of long-term debt in current liabilities, or mathematical errors

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

More questions from this exam