Question

Plum Corporation began the month of May with $1,400,000 of current assets, a current ratio of 2.30:1, and an acid-test ratio of 1.60:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

May		2		Purchased $55,000 of merchandise inventory on credit.
		8		Sold merchandise inventory that cost $65,000 for $145,000 cash.
		10		Collected $24,000 cash on an account receivable.
		15		Paid $31,500 cash to settle an account payable.
		17		Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account.
		22		Declared a $1 per share cash dividend on its 59,000 shares of outstanding common stock.
		26		Paid the dividend declared on May 22.
		27		Borrowed $100,000 cash by giving the bank a 30-day, 10% note.
		28		Borrowed $125,000 cash by signing a long-term secured note.
		29		Used the $225,000 cash proceeds from the notes to buy new machinery

Required:
Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Subtracted amount should be indicated with a minus sign.)

Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working cap transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places an to nearest dollar amount. Subtracted amount should be indicated with a minus sign.) Current Quick Current Current Acid-Test Working transaction Assets Assets Liabilities Ratio Ratio Capital Beginning a $ 608,696 1.400,000 973.913 2.30 1.60 $ 791,304 May 2 11,400,000 608,696 TL nt Balance May 8 ences balance May 10 Balance May 15 Balance May 17 Balance May 22 Balance May 26 Balance May 27 Balance May 28 Balance May 29 Balance

Answer 1

		Current	Quick	Current	Current	Acide	working
Transaction		assets	Assets	liabilities	ratio	test ratio	capital
Beginning		1,400,000	973913	608696	2.3	1.6	791,304
2-May		55,000		55,000
Balances		1,455,000	973913	663696	2.19	1.47	791,304
8-May		145,000	145,000
		-65,000
balances		1,535,000	1118913	663696	2.31	1.69	871,304
10-May		24,000	24,000
		-24,000	-24,000
Balance		1,535,000	1118913	663696	2.31	1.69	871,304
15-May		-31,500	-31,500	-31,500
Balance		1,503,500	1087413	632196	2.38	1.72	871,304
17-May		0	0	0
balance		1,503,500	1087413	632196	2.38	1.72	871,304
22-May		0	0	59000
Balances		1,503,500	1087413	691196	2.18	1.57	812,304
26-May		-59,000	-59,000	-59000
Balances		1,444,500	1028413	632196	2.28	1.63	812,304
27-May		100,000	100,000	100,000
Balances		1,544,500	1128413	732196	2.11	1.54	812,304
28-May		125,000	125,000	0
Balances		1,669,500	1253413	732196	2.28	1.71	937,304
Ma 29		-225,000	-225,000	0
Balances		1,444,500	1028413	732196	1.97	1.40	712,304