On June 30, 2011, Weslaco Company’s total current assets were $500,000 and its t

Question

On June 30, 2011, Weslaco Company’s total current assets were $500,000 and its total current liabilities were $275,000. On July 1, 2011, Weslaco issued a short-term note to a bank for $40,000 cash.

(a) Required:
Compute Weslaco’s working capital before and after issuing the note. (Omit the "$" sign in your response.)

Working capital before the transaction $_____
Working capital after the transaction $ _____

(b) Compute Weslaco’s current ratio before and after issuing the note. (Round your answers to 2 decimal places.)

Current ratio before the transaction _____: 1
Current ratio after the transaction _____: 1

Explanation / Answer

Working Capital = 500,000 - 275,000 = 225,000 Before and after WC is the same Current Ratio = 500,000/275,000 = 1.8181818 = 540,000/315,000 = 1.714286

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