Question

Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 2.10:1, and an acid-test ratio of 1.30:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). 2 Purchased $60,000 of merchandise inventory on credit 8 Sold merchandise inventory that cost $60,000 for $130,000 cash. 10 Collected $27,000 cash on an account receivable 15 Paid $23,500 cash to settle an account payable 17 Wrote off a $5,000 bad debt against the Allowance for Doubt ful Accounts account. 22 Declared a $1 per share cash dividend on its 60,000 shares of outstanding common stock 26 Paid the dividend declared on May 22. 27 Borrowed $120,000 cash by giving the bank a 30-day, 10% note. Мay S9 g-term secured note by 29 Used the $255,000 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.) Current Assets Quick Assets Transaction Acid-Test Ratio Working Capital Current Liabilities Current Ratio Beginning 700,000 $433,333 333,333 1.30 $ 366,667 2.10 May 2 Balance 700,000 333,333 May 8 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		700,000	433333	333333	2.1	1.3	366,667
2-May		60,000		60,000
Balances		760,000	433333	393333	1.93	1.10	366,667
8-May		130,000	130,000
		-60,000
balances		830,000	563333	393333	2.11	1.43	436,667
10-May		27,000	27,000
		-27,000	-27,000
Balance		830,000	563333	393333	2.11	1.43	436,667
15-May		-23,500	-23,500	-23,500
Balance		806,500	539833	369833	2.18	1.46	436,667
17-May		0	0	0
balance		806,500	539833	369833	2.18	1.46	436,667
22-May		0	0	60000
Balances		806,500	539833	429833	1.88	1.26	376,667
26-May		-60,000	-60,000	-60000
Balances		746,500	479833	369833	2.02	1.30	376,667
27-May		120,000	120,000	120,000
Balances		866,500	599833	489833	1.77	1.22	376,667
28-May		135,000	135,000	0
Balances		1,001,500	734833	489833	2.04	1.50	511,667
Ma 29		-255,000	-255,000	0
Balances		746,500	479833	489833	1.52	0.98	256,667