Question

The Sports Authority, Inc. is a private full-line sporting goods retailer. Assume one of the Sports Authority stores reported current assets of $88,550 and its current ratio was 1.75, and then completed the following transactions: (1) paid $5,700 on accounts payable, (2) purchased a delivery truck for $11,500 cash, (3) wrote off a bad account receivable for $2,300, and (4) paid previously declared dividends in the amount of $26,500. Required: Compute the updated current ratio after each transaction, by showing the cumulative effects of the transactions in the following table. (Round your answers to 2 decimal places.) Current Ratio 1.85 Transaction (1) Transaction (2) Transaction (3) Transaction (4) 1.59 Hints ReferenceseBook & Resources Hint #1

Answer 1

Ans.	Current Ratio =		CA / CL
	1.75 =		88,550 / CL
	CL =		88,550 / 1.75
	=		$             50,600
	Transaction (1)
	Current Ratio =		CA / CL
	=		(88,550-5,700)/ (50,600-5,700)
	=		82,850 / 44,900
	=		1.85
	Transaction (2)
	Current Ratio =		CA / CL
	=		(88,550 -11,500)/ 50,600
	=		77,050 / 50,600
	=		1.52
	Transaction (3)
	Current Ratio =		CA / CL
	=		(88,550 -2,300)/ 50,600
	=		86,250 / 50,600
	=		1.70
	Transaction (4)
	Current Ratio =		CA / CL
	=		(88,550 -26,500)/ 50,600
	=		62,050 / 50,600
	=		1.23