Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 4 on June 30 of

Question

Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 4 on June 30 of the current year. On that date, the company’s assets were:

What was the company’s working capital on June 30?

What was the company’s acid-test ratio on June 30? (Round your answer to 2 decimal places.)

The company paid an account payable of $38,000 immediately after June 30.

Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 4 on June 30 of the current year. On that date, the company’s assets were:

Explanation / Answer

Hey Dear Student !!

1)

Working Capital=
Current Assets-Current Liabilities

Current Ratio=
Current Assets/Current Liabilities

Current Assets= Cash+Account Receivable+Inventory+Prepaid Expenses

78000+380000+700000+12000=
$1170000

Current Liabilities= Current Assets/Current Ratio

1170000/4= $292500

Working Capital=
1170000-292500= $877500

2)

Acid Test Ratio= Acid Assets/Current Liabilities

Assets= Current Assets-Inventory

1170000-700000= $470000

Acid Test Ratio=
470000/292500= 1.61 Times

3)

A) Working Capital would not be affected because by this transaction both Current Assets & Current Liabilities will get Change by same amount so ultimate affect on working capital would be Zero.

B) Current Ratio would not be affected because by this transaction both Current Assets & Current Liabilities will get Change by same amount so ultimate affect on Current Ratio would be Zero.

Pleasure Teaching You !!

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