Question

Gwynn Incorporated had the following transactions involving current assets and current liabilities during February 2020 Feb. 3 Collected accounts receivable of $15,700. 7 Purchased equipment for $28,700 cash 11 Paid $ 3,700 for a 1-year insurance policy. 14 Paid accounts payable of $11,700 18 Declared cash dividends, $5,900. Additional information: As of February 1,2020, current assets were $ 130,520, and current liabilities were $ 50,200 Compute the current ratio as of the beginning of the month and after each transaction. (Round answers to 2 decimal places, e.g. 1.67.) Current ratio February 1 February 3 February 7 February 11 February 14 February 18

Answer 1

	Current assets	Current liabilities	Current ratio
Jan 1 balance	$ 1,30,520.00	$   50,200.00	2.60
Transaction February 3	$                     -
February 3 balance	$ 1,30,520.00	$   50,200.00	2.60
Transaction February 7	$   (28,700.00)
February 7 balance	$ 1,01,820.00	$   50,200.00	2.03
Transaction February 11	$                     -
February 11 balance	$ 1,01,820.00	$   50,200.00	2.03
Transaction February 14	$   (11,700.00)	$ (11,700.00)
February 14 balance	$      90,120.00	$   38,500.00	2.34
Transaction February 18		$      5,900.00
February 18 balance	$      90,120.00	$   44,400.00	2.03

Transaction on February 3,11 increases one current asset and decrease other current asset so the final effect on current asset balance remains zero that is why Current ratio do not change due to these tqo transactions.

February 1.	2.60
February 3.	2.60
February 7.	2.03
February 11.	2.03
February 14.	2.34
February 18.	2.03