PRIN ACCT (ACCT 221-233, Gradebosk ORION Dowleadable eTexthest Exercise 2-10 The

Question

PRIN ACCT (ACCT 221-233, Gradebosk ORION Dowleadable eTexthest Exercise 2-10 The chief financial ofer(OO) of Spish Brothers inc. ,eented me the a preliminary balance sheet on December 30, 2017, se that the CF0 could get an idea of ratio of at leant 2:1. The preliminary balance sheet is as hollow 126,500 receivable ,900 65,400 Prepaid insurance Equpment (net 20,700 267,100 21,500 2000 3300 Accounts payabl 81.00 Notes payable 100,000 151.700 Calculate the current ratio and working capital based on the preliminary balance sheet. (Round Current Ratio to 1 decimal place, e.g. o.7:1.) Current ratio Working capital$ LINK TO TEXT Based on the results in (a), the CFO requested that $21,500 of cash be used to pay off the balance of the accounts payable account on December 31, 2017.C working capital after the company takes these actions. (Round Current Ratio to 1 decimal place, e.g. 0.7:1 Current ratio Working capital Click if you would like to Show Work for this question: Open Show Work Question Attempts: 0 of 3 used SA

Explanation / Answer

Current ratio = Current assets / Current liabilities = 65400 / 33500 = 1.95 : 1

Working capital = Current asset - Current liabilities = 65400 - 33500 = 31900

Case - 2

When 21500 of cash is used to pay accounts payable .........Current assets decrease by 21500 and current liabilities shall decrease by 21500.

Current assets = 65400 - 21500 = 43900

Current liabilities = 33500 - 21500 = 12000

Current ratio = 43900 / 12000 = 3.66

Working capital = current assets - current liabilities = 43900 - 12000 = 31900

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