Ratio of Currents Assets(1000000) to Current Liabilites (400,000) is 2.5:1. The accountant of the firm is interested in maintaining a current Ratio of 2:1 by acquiring some current assets on credit.you are required to suggest him the amount of current assets that should be acquired

Explanation

Let the amount of current assets acquired on credit be x
After the acquisition of current assets on credit, current assets and current liabilities both will increase buy x. Thus,
Current Ratio =`("Current Ratio")/("Current Liabilites") =(Rs 1000000+x)/(Rs 400000+x)=2`
Rs 800000+ 2x=Rs 1000000+x
2x-x=Rs 100000=Rs 800000
x=Rs200000
Thus curent Assets that should be acquired on credit = Rs 200000.