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

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: Cash Accounts receivable, net Inventory Prepaid expenses Plant and equipment, net Total assets $ 78,000 380,000 690,000 9,000 1,740,000 $2,897,000 points eBook Required: 1. What was the company's working capital on June 30? 2. What was the company's acid-test ratio on June 30? (Round your answer to 2 decimal places.) 3. The company paid an account payable of $47,000 immediately after June 30. a. What effect did this transaction have on working capital? b. What effect did this transaction have on the current ratio? (Round your intermediate calculations to 1 decimal place.) References 1. Working capital 2. Acid-test ratio 3a. Effect on working capital 3b. Effect on current ratio

Explanation / Answer

Total current assets = 78000+380000+690000+9000 = 1157000

Current liabilities = 1157000/2 = 578500

1. Working capital = 1157000-578500 = 578500

2) Acid test ratio = (78000+380000)/578500 = 0.79

3a) Working capital = (1157000-47000)-(578500-47000) = 578500

No change in working capital

3b) Current ratio = (11570000-47000)/(578500-47000) = 2.1

Current ratio increase by 0.1

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