Urban-Wear Clothes Co. had the following current assets and liabilities for two comparative years:
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Dec. 31, 2008
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Dec. 31, 2007
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Current assets:
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|
|
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Cash
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$140,000
|
$205,000
|
|
Accounts receivable
|
250,000
|
245,000
|
|
Inventory
|
300,000
|
180,000
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Total current assets
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$690,000
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$630,000
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|
Current liabilities:
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|
|
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Current portion of long-term debt
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$ 50,000
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$ 50,000
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|
Accounts payable
|
200,000
|
190,000
|
|
Accrued expenses payable
|
140,000
|
135,000
|
|
Total current liabilities
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$390,000
|
$375,000
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a. Determine the quick ratio for December 31, 2008 and 2007.
b. Interpret the change in the quick ratio between the two balance sheet dates.