Plum Corporation began the month of May with $1,100,000 of current assets, a current ratio of 1.80:1, and an acid-test ratio of 1.30:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $70,000 of merchandise inventory on credit. May 8 Sold merchandise inventory that cost $65,000 for $120,000 cash. May 10 Collected $23,000 cash on an account receivable. May 15 Paid $31,000 cash to settle an account payable. May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. May 22 Declared a $1 per share cash dividend on its 57,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed May 28 Borrowed $90,000 cash by giving the bank a 30-day, 10% note. $115,000 cash by signing a long-term secured note. May 29 Used the $205,000 cash proceeds from the notes to buy new machinery.. Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. Note: Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Amounts to be deducted should be indicated with a minus sign.
Plum Corporation began the month of May with $1,100,000 of current assets, a current ratio of 1.80:1, and an acid-test ratio of 1.30:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $70,000 of merchandise inventory on credit. May 8 Sold merchandise inventory that cost $65,000 for $120,000 cash. May 10 Collected $23,000 cash on an account receivable. May 15 Paid $31,000 cash to settle an account payable. May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. May 22 Declared a $1 per share cash dividend on its 57,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed May 28 Borrowed $90,000 cash by giving the bank a 30-day, 10% note. $115,000 cash by signing a long-term secured note. May 29 Used the $205,000 cash proceeds from the notes to buy new machinery.. Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. Note: Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Amounts to be deducted should be indicated with a minus sign.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Topic Video
Question
Ht.5.
Transcribed Image Text:Plum Corporation began the month of May with $1,100,000 of current assets, a current ratio of 1.80:1, and an acid-test ratio of 1.30:1.
During the month, it completed the following transactions (the company uses a perpetual inventory system).
May 2 Purchased $70,000 of merchandise inventory on credit.
May 8 Sold merchandise inventory that cost $65,000 for $120,000 cash.
May 10 Collected $23,000 cash on an account receivable.
May 15 Paid $31,000 cash to settle an account payable.
May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account.
May 22 Declared a $1 per share cash dividend on its 57,000 shares of outstanding common stock.
May 26 Paid the dividend declared on May 22.
May 27 Borrowed $90,000 cash by giving the bank a 30-day, 10% note.
May 28 Borrowed $115,000 cash by signing a long-term secured note.
May 29 Used the $285,000 cash proceeds from the notes to buy new machinery.
Required:
Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction.
Note: Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar
amount. Amounts to be deducted should be indicated with a minus sign.
Transcribed Image Text:Transaction
Beginning
May 2
May 2
Balance after May 2
May 8
May 8
Balance after May 8
May 10
May 10
Balance after May 10
May 15
May 15
Balance after May 15
May 17
May 17
Balance after May 17
May 22
May 22
Balance after May 22
May 26
May 26
Balance after May 26
May 27
May 27
Balance after May 27
May 28
May 28
Current Assets Quick Assets Current Liabilities
$ 1,100,000 $ 794,444 $
70,000
1,170,000
120,000
23,000
120,000
23,000
611,111
70,000
681,111
Current Ratio Acid-Test Ratio Working Capital
1.30
$
488,889
1.80
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education