Question

Selected amounts from Reingold Company's balance sheet from the beginning of the year follow: Cash Marketable Securities Accounts receivable. net Inventory Prepaid expenses Plant and equipment, net Accounts payable Accrued liabilities Notes due within one year Bonds payable in five years $ 57,000 $ 5,500 $ 318,800 $ 426,200 $ 5,400 $ 820,000 $ 176,600 $ 48,300 $ 74,000 $ 127,000 During the year, the company completed the following transactions X Purchased inventory on account, $40.250. a. Declared a cash dividend $17,000 b. Paid accounts payable, $79,200. C. Collected cash on accounts receivable, $65.700. d. Purchased equipment for cash, $64,600 e Paid a cash dividend previously declared. $17.000. f. Borrowed cash on a short-term note with the bank $40.500. g Sold inventory costing $59.600 for $87.000, on account h. Wrote off uncollectible accounts in the amount of $4 800 reducing the accounts receivable balance accordingly Sold marketable securities costing $5.500 for cash $3,800, Issued additional shares of common stock for cash $174.000 Paid off all short-term notes due $114 500

Answer 1

a) Working capital = current assets-current liability
current assets
cash				57000
marketable securities				5500
accounts receivables				318800
inventory				426200
prepaid expenses				5400
total current assets				812900
Current liability
accounts payable				176600
accrued liabilities				48300
notes due (within one year)				74000
total current liability				298900
Working capital = 812900-298900 = 514000
b) Current ratio = current assets/current liabilty
current ratio = 812900/298900 = 2.72
c) Acid test ratio = quick assets/current liability
quick assets
cash				57000
marketable securities				5500
accounts recevable				318800
total				381300
acid test ratio = 381300/298900 = 1.28

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