Question

Plum Corporation began the month of May with $1,400,000 of current assets, a current ratio of 2.70:1, and an acid-test ratio of 1.60:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

Plum Corporation began the month of May with $1.400,000 of current assets, a current ratio of 2.70:1, 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 $75,88e of merchandise inventory on credit 8 Sold merchandise inventory that cost $45,80 for $158,880 cash 18 Collected $24,888 cash on an account receivable 15 Paid $23,58e cash to settle an account payable 17 Wrote off a $5,880 bad debt against the Allowance for Doubtful Accounts account 22 Declared a $1 per share cash dividend on its 62,88e shares of outstanding common stock 26 Paid the dividend declared on May 22 27 Borrowed $95,000 cash by giving the bank a 30-day, 10% note 28 Borrowed $118,888 cash by signing a long-term secured note 29 Used the $285,888 cash proceeds from the notes to buy new machinery Requlred Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round Intermedlete calculatlons. Round your ratlos to 2 declmal pleces and the worklng capltals to nearest doller amount. Subtracted amount should be Indlcated with a mlnus sign.) Current Liabilities Current Ratio Acid-Test Ratio Working Capital Assets Assets Beginning S 1.400,000 5 829,630 3 518,519 2.70 1.60 S 881.431 May 2 Balance 1.400,000 518.519 May 8 Balance May 10 Balance May 15 Balance May 17

Answer 1

Transaction	Current assets	Quick assets	Current liabilities	Current ratio (CA/CL)	Acid-test ratio (QA/CL)	Working capital (CA-CL)
Beginning	1,400,000	829,630	518,519	2.70	1.60	881,481
May 2	75,000
			75,000
Balance	1,475,000	829,630	593,519	2.49	1.40	881,481
May 8	150,000	150,000
	(45,000)
Balance	1,580,000	979,630	593,519	2.66	1.65	986,481
May 10	24,000	24,000
	(24,000)	(24,000)
Balance	1,580,000	979,630	593,519	2.66	1.65	986,481
May 15	(23,500)	(23,500)
			(23,500)
Balance	1,556,500	956,130	570,019	2.73	1.68	986,481
May 17	-	-	-
	-	-	-
Balance	1,556,500	956,130	570,019	2.73	1.68	986,481
May 22	-	-	62,000
	-	-	-
Balance	1,556,500	956,130	632,019	2.46	1.51	924,481
May 26	(62,000)	(62,000)
			(62,000)
Balance	1,494,500	894,130	570,019	2.62	1.57	924,481
May 27	95,000	95,000
			95,000
Balance	1,589,500	989,130	665,019	2.39	1.49	924,481
May 28	110,000	110,000
Balance	1,699,500	1,099,130	665,019	2.56	1.65	1,034,481
May 29	(205,000)	(205,000)
Balance	1,494,500	894,130	665,019	2.25	1.34	829,481