Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2 on June 30 of

ID: 2494080 • Letter: N

Question

Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2 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 2 on June 30 of the current year. On that date, the company’s assets were:

Given Current Ratio = 2

Current Assets = Cash + Accounts receivable + Inventory + Prepaid expenses

= 74,000 + 430,000 + 670,000 + 11,000

=$1185,000

Current ratio = Current ASsets/Current Liabilities

2 = 1185,000/Current Liabilities

Current Liabilities = 592,500

1)The company’s working capital on June 30 = Current Assets - Current Liabilities

= 1185,000 - 592,500

= $592,500

2)Acid - test ratio = (Total Current Assets - Inventory - Prepaid Expense)/Currenr Liabilities

= (1185,000-670,000-11,000)/592,500

= 0.85

...

3)a)The company paid an account payable of $38,000 immediately after June 30 - Working capital would not be affected.

Reason both current liability & current asset will decrease by equal amount of $38,000

3)b)New current ratio = (1185000-38000)/(592500-38000)

= 1147,000/554500

= 2.07

Therfore Current ratio will increase from 2 to 2.07

Answer = Current ratio would increase.

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