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anOnline School/Work InterestsYoutube/Blog SoleraBank/CarDog Messages for web Other bookm CHAPTER 13 6 Help Save & Exit Submit Saved Check my work Plum Corporation began the month of May with $1,100,000 of current assets, a current ratio of 2.70:1, and an acid-test ratio of 1.50:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). 10 points 10 Collected $22,000 cash on an account receivable 15 Paid $24, 500 cash to settle an account payable 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account 22 Declared a $1 per share cash dividend on its 62,000 shares of outstanding common stock 26 Paid the dividend declared on May 22 27 Borrowed $110,000 cash by giving the bank a 30-day, 10% note 28 Borrowed $130, 000 cash by signing a long-term secured note 29 Used the $240, 000 cash proceeds from the notes to buy new machinery eBook References Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Subtracted amount should be indicated with a minus sign.) Current Assets Quick Assets Current Liabilities Current Ratio Acid-Test Ratio Working Capital Transaction Beginning May 2 407,407 2.70 1.50 S 692,593 1,165,000 407,407 Next> Mc Prev 1 of 2 Hill 1:46Explanation / Answer
Changes in ratios
Transaction
Current Assets
Quick Assets
Current liabilities
Current ratio
Acid test Ratio
Working Capital
Beginning
$ 1,100,000.00
$ 611,111.00
$ 407,407.00
2.70
1.50
$ 692,593.00
2-May
$ 65,000.00
$ 65,000.00
Balance
$ 1,165,000.00
$ 611,111.00
$ 472,407.00
2.47
1.29
$ 692,593.00
8-May
$ 155,000.00
$ 155,000.00
$ (65,000.00)
Balance
$ 1,255,000.00
$ 766,111.00
$ 472,407.00
2.66
1.62
$ 782,593.00
10-May
$ (22,000.00)
$ 22,000.00
$ 22,000.00
Balance
$ 1,255,000.00
$ 788,111.00
$ 472,407.00
2.66
1.67
$ 782,593.00
15-May
$ (24,500.00)
$ (24,500.00)
$ (24,500.00)
Balance
$ 1,230,500.00
$ 763,611.00
$ 447,907.00
2.75
1.70
$ 782,593.00
17-May
$ (5,000.00)
Balance
$ 1,225,500.00
$ 763,611.00
$ 447,907.00
2.74
1.70
$ 777,593.00
22-May
$ 62,000.00
Balance
$ 1,225,500.00
$ 763,611.00
$ 509,907.00
2.40
1.50
$ 715,593.00
26-May
$ (62,000.00)
$ (62,000.00)
$ (62,000.00)
Balance
$ 1,163,500.00
$ 701,611.00
$ 447,907.00
2.60
1.57
$ 715,593.00
27-May
$ 110,000.00
$ 110,000.00
$ 110,000.00
Balance
$ 1,273,500.00
$ 811,611.00
$ 557,907.00
2.28
1.45
$ 715,593.00
28-May
$ 130,000.00
$ 130,000.00
Balance
$ 1,403,500.00
$ 941,611.00
$ 557,907.00
2.52
1.69
$ 845,593.00
29-May
$ (240,000.00)
$ (240,000.00)
Balance
$ 1,163,500.00
$ 701,611.00
$ 557,907.00
2.09
1.26
$ 605,593.00
Notes
1.Quick assets are Cash+ Accounts receivables+ Marketable Securities.
8-May
Inventory decreased on sale and cash Increased net effect is shown in balance.
10-May
Current Assets Does not change because Increase in cash is equal to decrease in Receivables.
22-May
Dividend is only Declared but not pais so Current liability is increased.
28-May
Loan is long term and will not affect current liabilities.
Changes in ratios
Transaction
Current Assets
Quick Assets
Current liabilities
Current ratio
Acid test Ratio
Working Capital
Beginning
$ 1,100,000.00
$ 611,111.00
$ 407,407.00
2.70
1.50
$ 692,593.00
2-May
$ 65,000.00
$ 65,000.00
Balance
$ 1,165,000.00
$ 611,111.00
$ 472,407.00
2.47
1.29
$ 692,593.00
8-May
$ 155,000.00
$ 155,000.00
$ (65,000.00)
Balance
$ 1,255,000.00
$ 766,111.00
$ 472,407.00
2.66
1.62
$ 782,593.00
10-May
$ (22,000.00)
$ 22,000.00
$ 22,000.00
Balance
$ 1,255,000.00
$ 788,111.00
$ 472,407.00
2.66
1.67
$ 782,593.00
15-May
$ (24,500.00)
$ (24,500.00)
$ (24,500.00)
Balance
$ 1,230,500.00
$ 763,611.00
$ 447,907.00
2.75
1.70
$ 782,593.00
17-May
$ (5,000.00)
Balance
$ 1,225,500.00
$ 763,611.00
$ 447,907.00
2.74
1.70
$ 777,593.00
22-May
$ 62,000.00
Balance
$ 1,225,500.00
$ 763,611.00
$ 509,907.00
2.40
1.50
$ 715,593.00
26-May
$ (62,000.00)
$ (62,000.00)
$ (62,000.00)
Balance
$ 1,163,500.00
$ 701,611.00
$ 447,907.00
2.60
1.57
$ 715,593.00
27-May
$ 110,000.00
$ 110,000.00
$ 110,000.00
Balance
$ 1,273,500.00
$ 811,611.00
$ 557,907.00
2.28
1.45
$ 715,593.00
28-May
$ 130,000.00
$ 130,000.00
Balance
$ 1,403,500.00
$ 941,611.00
$ 557,907.00
2.52
1.69
$ 845,593.00
29-May
$ (240,000.00)
$ (240,000.00)
Balance
$ 1,163,500.00
$ 701,611.00
$ 557,907.00
2.09
1.26
$ 605,593.00
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