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The chief financial officer (CFO) of Sheridan Company requested that the accounting department prepare a preliminary balance sheet on December 30, 2017, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as follows. Sheridan Company Balance Sheet December 30, 2017 Current assets Cash 27,000 31,300 6,200 Accounts receivable Prepaid insurance 64,500 Equipment (net) 201,300 Total assets 265,800 Current liabilities Accounts payable Salaries and wages payable Long-term liabilities Notes payable Total liabilities 22,000 11,300 33,300 81,200 114,500Stockholders equity Common stock Retained earnings Total liabilities and stockholders equity 100,000 51,300 151,300 265,800 Your answer is partially correct. Calculate the current ratio and working capital based on the preliminary balance sheet. (Round Current Ratio to 1 decimal place, eg. 0.7:1.) Current ratio 1.9 :1 Working capital 31000

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Answer #1
Old: Current Ratio= Current Assets/Current Liabilties
(64500)/(33300)
1.94
Working Capital=Current Assets-Current Liabilties
(64500-33300)
31200
Revised:
Current Ratio= Current Assets/Current Liabilties
(64500-22000)/(33300-22000)
3.76
Working Capital=Current Assets-Current Liabilties
(42500-11300)
31200
1 1
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