#### Question 11:

#### Current Liabilities of a company were `1,75,000 and its Current Ratio was 2: 1. It paid `30,000 to a Creditor. Calculate Current Ratio after payment.

**Answer:**

Current Ratio= 2:1** before payment to Creditor**

Current Liabilities = `1,75,000**
before payment to Creditor**

Current Assets = (`1,75,000×2)=3,50,000**
before payment to Creditor**

Current Ratio **After** **payment to Creditor**

=3,50,000-30,000/1,75,000-30,000

Current Ratio = 3,20,000/1,45,000

Current Ratio = 2.21/1

#### Question 12:

Ratio of Current Assets (`3,00,000) to Current Liabilities ( `2,00,000) is 1.5:1. The accountant of the firm is interested in maintaining a Current Ratio of 2:1 by paying off a part of the Current Liabilities. Compute amount of the Current Liabilities that should be paid so that the Current Ratio at the level of 2:1 may be maintained.

#### Answer:

Current ratio= Current assets/Current liabilities=1.5:1

The company is interested in maintaining the Current Ratio of 2:1 by paying off the liability.

Let the
liability paid-off by the company = *x*

∴ New Current Assets =
3,00,000 − *x*

New Current
Liabilities = 2,00,000 − *x*

New Current ratio= 3,00,000-x/2,00,000-x=2:1

Or 3,00,000-3x=4,00,000-2x

Or 1,00,000

Therefore, liability of `1,00,000 need to be paid-off by the company in order to maintain the Current Ratio of 2 : 1.

#### Question 13:

#### Ratio of Current Assets ( `8,75,000) to Current Liabilities ( `3,50,000) is 2.5:1. The firm wants to maintain Current Ratio of 2:1 by purchasing goods on credit. Compute amount of goods that should be purchased on credit.

#### Answer:

Current Assets = ` 8,75,000

Current Liabilities = ` 3,50,000

Current Ratio = 2.5:1

The business is interested to maintain its Current Ratio at 2:1 by purchasing
goods on credit.

Let the amount of goods purchased on credit be ‘x’

Current Liabilities = ` 3,50,000 + x

Current Assets = ` 8,75,000 + x

Current ratio= Current assets/Current liabilities=8,75,,000+x/3,50,000+x=2/1

8,75,000 + x = 7,00,000 + 2x

8,75,000 – 7,00,000 = 2x – x

1,75,000 = x

Therefore, goods worth ` 1,75,000 must be
purchased on credit to maintain the current ratio at 2:1.

#### Question 14:

A firm had Current Assets of `5,00,000. It paid Current Liabilities of `1,00,000 and the Current Ratio became 2:1. Determine Current Liabilities and Working Capital before and after the payment was made.

#### Answer:

Firm disposed off liabilities of `
1,00,000 which results in decrease in current liabilities and current assets by
the same amount.

**After disposing liabilities:**

Current Assets = ` 4,00,000 ( `
5,00,000 – ` 1,00,000)

And, Let Current Liabilities be (x – ` 1,00,000)

Current ratio= Current assets/Current liabilities=4,00,000/x-1,00,000=2:1

4,00,000 = 2x – 2,00,000

6,00,000 = 2x

Therefore, x = 3,00,000

Current Liabilities after payment = x – ` 1,00,000 = `
2,00,000

Working Capital after Payment = Current Assets – Current Liabilities

= ` 4,00,000 – `
2,00,000 = ` 2,00,000

Current Assets before payment = ` 5,00,000

Current Liabilities before Payment = ` 3,00,000

Therefore, Working Capital Before Payment = Current Assets – Current
Liabilities

= ` 5,00,000 – `
3,00,000 = ` 2,00,000

**Question 15:** A firm had Current Liabilities of ` 5,40,000. It
purchased stock of `60,000
on credit. After the purchase of stock Current Ratio was 2 : 1. Calculate
Current Assets and Working Capital after and before the stock was purchased.

**Answer: **

(**Before**) Current Liabilities of `5,40,000.

Current Ratio was 2:1 (**After **the purchase of stock)

(**Before**) Current Assets = ? (x)

2/1=x+60,000/5,40,000+60,000

x+60,000=10,80,000+1,20,000

x=12,00,000-60,000

(**Before**) Current Assets x=11,40,000

(**After**) Current Assets x=11,40,000+60,000=12,00,000

(**After**) Current Liabilities of `5,40,000+60,000=6,00,000

Working Capital **after** purchase=12,00,000-6,00,000=6,00,000

Working Capital **before** purchase=11,40,000-5,40,000=6,00,000

**Ts Grewal Solution 2023-2024**

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**Class 12 / Volume – I**

__Chapter 3 – Accounting Ratio__