The Sports Authority, Inc., is the country\'s largest private full-line sporting

Question

The Sports Authority, Inc., is the country's largest private full-line sporting goods retailer. Stores are operated under four brand names: Sports Authority, Gart Sports, Oshman's, and Sportmart. Assume one of the Sports Authority stores reported current assets of $83,000 and its current ratio was 1.40. Assume that the following transactions were completed: (1) paid $5,400 on accounts payable, (2) purchased a delivery truck for $9,100 cash, (3) wrote off a bad account receivable for $2,800 (Allowance Method), and (4) paid previously declared dividends in the amount of $25,000. Required: Compute the updated current ratio. (Round your intermediate calculations and final answers to 2 decimal places.) Current ratio Transaction (1) Transaction (2) Transaction (3) Transaction (4)

Explanation / Answer

Current ratio = Current asset/Current liabilities 1.40 = 83000/Current liabilities Current Liabilities = 83000/1.4 = $59286 (1) Paid $5400 on account payable New Current ratio = (83000-5400)/(59286-5400) = 1.44 (2) Purchased a delivery truck for $9100 cash New current ratio = (83000-5400)/59286 = 1.31 (3) Wrote off a bad account receivable for $2,800 New current ratio = (83000-2800)/59286 = 1.35 (4) Paid previously declared dividends in the amount of $25,000 New Current ratio = (83000-25000)/(59286-25000) = 1.69 Hope this helps!

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