Given the following items from a company's balance sheet:- Cash: \$12,000- Accounts Receivable: \$8,000- Inventory: \$5,000- Accounts Payable: \$6,000- Short-term Notes Payable: \$4,000What is the total amount of (a) liquid assets and (b) current liabilities?(Liquid assets include cash and accounts receivable. Current liabilities include accounts payable and short-term notes payable.)

• A. (a) \$17,000; (b) \$9,000
• B. (a) \$12,000; (b) \$6,000
• C. (a) \$20,000; (b) \$10,000
• D. (a) \$25,000; (b) \$11,000

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definitions provided in the problem. Liquid assets are defined as cash and accounts receivable, while current liabilities include accounts payable and short-term notes payable.
2. Step 2: Identify the values for liquid assets from the balance sheet. Cash is \$12,000 and accounts receivable is \$8,000. Add these two amounts together to calculate the total liquid assets.
3. Step 3: Use the formula for liquid assets: Liquid Assets = Cash + Accounts Receivable. In MathML, this can be expressed as: $\mathrm{Liquid}\mathrm{Assets}=\mathrm{Cash}+\mathrm{Accounts}\mathrm{Receivable}$
4. Step 4: Identify the values for current liabilities from the balance sheet. Accounts payable is \$6,000 and short-term notes payable is \$4,000. Add these two amounts together to calculate the total current liabilities.
5. Step 5: Use the formula for current liabilities: Current Liabilities = Accounts Payable + Short-term Notes Payable. In MathML, this can be expressed as: $\mathrm{Current}\mathrm{Liabilities}=\mathrm{Accounts}\mathrm{Payable}+\mathrm{Short}\mathrm{term}\mathrm{Notes}\mathrm{Payable}$