Exercise 3-17 (Algo) Effect of transactions on working capital and current ratio LO 3-6 Jay Oullette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year-end balance sheet will show current assets of $12,774 and current liabilities of $7,570. Oullette has asked your advice concerning a possible early payment of $3,870 of accounts payable before year-end, even though payment isn't due until later. Required: a. Calculate the firm's working capital and current ratio under each situation. b. 1. Assume that Bumper to Bumper had negotiated a short-term bank loan of $6,000 that can be drawn down either before or after the end of the year. Calculate working capital and the current ratio at year-end under each situation, assuming that early payment of accounts payable is not made. 2. When would you recommend that the loan be taken? Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Calculate the firm's working capital and current ratio under each situation. Note: Round "Current ratio" answers to 1 decimal place. Do Not Prepay Prepay Accounts Payable Accounts Payable Working capital Current ratio < Required A Required B1 >
Exercise 3-17 (Algo) Effect of transactions on working capital and current ratio LO 3-6 Jay Oullette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year-end balance sheet will show current assets of $12,774 and current liabilities of $7,570. Oullette has asked your advice concerning a possible early payment of $3,870 of accounts payable before year-end, even though payment isn't due until later. Required: a. Calculate the firm's working capital and current ratio under each situation. b. 1. Assume that Bumper to Bumper had negotiated a short-term bank loan of $6,000 that can be drawn down either before or after the end of the year. Calculate working capital and the current ratio at year-end under each situation, assuming that early payment of accounts payable is not made. 2. When would you recommend that the loan be taken? Complete this question by entering your answers in the tabs below. Required A Required B1 Required B2 Calculate the firm's working capital and current ratio under each situation. Note: Round "Current ratio" answers to 1 decimal place. Do Not Prepay Prepay Accounts Payable Accounts Payable Working capital Current ratio < Required A Required B1 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Rahul
Transcribed Image Text:Exercise 3-17 (Algo) Effect of transactions on working capital and current ratio LO 3-6
Jay Oullette, CEO of Bumper to Bumper Incorporated, anticipates that his company's year-end balance sheet will show current assets
of $12,774 and current liabilities of $7,570. Oullette has asked your advice concerning a possible early payment of $3,870 of accounts
payable before year-end, even though payment isn't due until later.
Required:
a. Calculate the firm's working capital and current ratio under each situation.
b. 1. Assume that Bumper to Bumper had negotiated a short-term bank loan of $6,000 that can be drawn down either before or after
the end of the year. Calculate working capital and the current ratio at year-end under each situation, assuming that early
payment of accounts payable is not made.
2. When would you recommend that the loan be taken?
Complete this question by entering your answers in the tabs below.
Required A Required B1 Required B2
Calculate the firm's working capital and current ratio under each situation.
Note: Round "Current ratio" answers to 1 decimal place.
Do Not Prepay
Prepay
Accounts Payable Accounts Payable
Working capital
Current ratio
< Required A
Required B1 >
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