You’re the CFO of X Co. X has long-term debt. A covenant in the debt agreement stipulates that X must maintain a current ratio [current assets / current liabilities] that is at least 2.0.
As a balance sheet date approaches, you obtain an interim partial balance sheet that shows the following
Please answer these three questions. Thank you.
1) Pay off the Accounts Payable (current liabilities) $200,000.
2)
Transaction | General Journal | Debit($) | Credit($) |
1 | Accounts Payable | 200,000 | |
Cash | 200,000 | ||
(to record the payment to accounts payable) |
3) Current Assets Current Liabilities
Cash $300,000 A/P $200,000
A/R $200,000 Other $200,000
Inventory $300,000
TOTAL $800,000 $400,000
Current Ratio = Current assets / Current liabilities
= $800,000 / $400,000
= 2.0
You’re the CFO of X Co. X has long-term debt. A covenant in the debt agreement...
The chief financial officer (CFO) of Wildhorse Co.requested that the accounting department prepare a preliminary balance sheet on December 20, 2022 so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as follows. Wildhorse Co. Balance Sheet December 30, 2022 Current assets Cash $26,300 26,700 Accounts receivable Prepaid insurance 6,400 S59,400...
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I need help in solving this problem as well as getting a better
understanding of it, thank you.
The chief financial officer (CFO) of Wildhorse Co. requested that the accounting department prepare a preliminary balance sheet on December 30, 2022, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as...
A. The chief financial officer (CFO) of Crane Corporation
requested that the accounting department prepare a preliminary
statement of financial position on December 20, 2018. He knows that
certain debt agreements with its lenders require the company to
maintain a current ratio of at least 2:1 and wants to know how the
company is doing. The preliminary statement of financial position
follows:
CRANE
CORPORATION
Statement of Financial Position
December 20, 2018
Assets
Liabilities
Current assets
Current liabilities
Cash
$22,000...
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