A.3 Right Way Products had a current ratio of 2.5 on June 30 of the current year. On that date, the company's assets were as follows: Cash Accounts receivable, net Inventory Prepaid expenses Plant and equipment, net Total assets $ LA 80,000 460,000 750,000 10,000 1,900,000 $3,200,000 Required: 1. What was the company's working capital on June 30? 2. What was the company's acid-test ratio on June 30? 3. The company paid an account payable of $100,000 immediately after June 30. (a) What effect did this transaction have on working capital? Show computations. (b) What effect did this transaction have on the current ratio? Show computations.
A.3 Right Way Products had a current ratio of 2.5 on June 30 of the current year. On that date, the company's assets were as follows: Cash Accounts receivable, net Inventory Prepaid expenses Plant and equipment, net Total assets $ LA 80,000 460,000 750,000 10,000 1,900,000 $3,200,000 Required: 1. What was the company's working capital on June 30? 2. What was the company's acid-test ratio on June 30? 3. The company paid an account payable of $100,000 immediately after June 30. (a) What effect did this transaction have on working capital? Show computations. (b) What effect did this transaction have on the current ratio? Show computations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A.3 Right Way Products had a current ratio of 2.5 on June 30 of the
current year. On that date, the company's assets were as follows:
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Plant and equipment, net
Total assets
$
LA
80,000
460,000
750,000
10,000
1,900,000
$3,200,000
Required:
1. What was the company's working capital on June 30?
2. What was the company's acid-test ratio on June 30?
3. The company paid an account payable of $100,000 immediately after
June 30.
(a) What effect did this transaction have on working capital? Show
computations.
(b) What effect did this transaction have on the current ratio? Show
computations.
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