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    Inventory Amount

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    ABC Company has a current ratio of 3.5 to 1 and an acid-test ratio of 2.8 to 1. Current assets equal $175,000 of which $5,000 consists of prepaid expenses. ABC Company's inventory must be:

    A) $30,000.
    B) $40,000.
    C) $50,000.
    D) $35,000.

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    Solution Preview

    Current ratio = Current Assets/Current Liabilities = 3.5
    Acid test ratio = ...

    Solution Summary

    The solution explains how to calculate the inventory amount given the current and quick ratio