Question

The Sports Authority, Inc. is a private full-line sporting goods retailer. Assume one of the Sports Authority stores reported current assets of $88,550 and its current ratio was 1.75, and then completed the following transactions: (1) paid $5,700 on aunts payable, (2) purchased a de ivery tuck for $11,500 cash, (3) wrote off a bad account receivable for $2,300, and (4) paid previously declared dividends in the amount of $26,500. Required: Compute the updated current ratio after each transaction, by showing the cumulative effects of the transactions in the following table. (Round your answers to 2 decimal places.) Ratio Transaction (1) Transaction (2) ransacton (3) saction (4)

Answer 1

Answer---

	Current ratio
Transaction 1	1.85
Transaction 2	1.59
Transaction 3	1.54
Transaction 4	2.31

Working

	Current assets	Current liabilities	Current ratio
Beginning balance	$     88,550.00	$     50,600.00	1.75
Transaction 1	$     (5,700.00)	$     (5,700.00)
Balance	$     82,850.00	$     44,900.00	1.85
Transaction 2	$ (11,500.00)
Balance	$     71,350.00	$     44,900.00	1.59
Transaction 3	$     (2,300.00)
Balance	$     69,050.00	$     44,900.00	1.54
Transaction 4	$ (26,500.00)	$   (26,500.00)
Balance	$     42,550.00	$     18,400.00	2.31

In entry no 3 it is assumed that accounts receivables are directly written off.

In transaction 1 and 4 current asserts and current liability will reduce by same amount.