Selected amounts from Reingold Company’s balance sheet from the beginning of the year follow: |
Cash | $ | 79,000 |
Marketable Securities | $ | 16,500 |
Accounts receivable, net | $ | 371,600 |
Inventory | $ | 483,400 |
Prepaid expenses | $ | 14,300 |
Plant and equipment, net | $ | 1,040,000 |
Accounts payable | $ | 216,200 |
Accrued liabilities | $ | 68,100 |
Notes due within one year | $ | 118,000 |
Bonds payable in five years | $ | 149,000 |
During the year, the company completed the following transactions: |
x. | Purchased inventory on account, $56,750. |
a. | Declared a cash dividend, $39,000. |
b. | Paid accounts payable, $114,400. |
c. | Collected cash on accounts receivable, $89,900. |
d. | Purchased equipment for cash, $82,200. |
e. | Paid a cash dividend previously declared, $39,000. |
f. | Borrowed cash on a short-term note with the bank, $73,500. |
g. | Sold inventory costing $77,200 for $109,000, on account. |
h. |
Wrote off uncollectible accounts in the amount of $13,600 reducing the accounts receivable balance accordingly. |
i. | Sold marketable securities costing $16,500 for cash, $12,600. |
j. | Issued additional shares of common stock for cash, $218,000. |
k. | Paid off all short-term notes due, $191,500. |
Required: |
1. | Compute the following amounts and ratios as of the beginning of the year: |
a. | Working capital. |
b. | Current ratio. (Round your answer to 2 decimal places.) |
c. | Acid-test ratio. (Round your answer to 2 decimal places.) |
(a)Working Capital= Current assets- Current Liabilities
Current Asset In $
Marketable securities Nil
Account receivables 268100
inventory 462950
Prepaid Expenses 14300
Total Current Assets 745350
Current Liabilities
Account payable 101800
Accrued liabilities 68100
Notes due Nil
Total current liabilities $ 169900
Working Capital = Current asset- Current Liabilities
=$745350-$169900= $575450
(B)Current ratio= Current asset/Current Liabilties
= $745350/$169900=$4.386 times
(C) Acid test ratio=Current assets- Stock-prepaid expenses/ Current liabilities
Quick assets$745350-$462950-$14300=$268100
Quick ratio=$268100/$169900=$1.57 times
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