Plum Corporation began the month of May with $1,200,000 of current assets, a current ratio of 2.50:1, and an acid - test ratio of 1.40:1. 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 $45,000 for $130,000 cash. May 10 Collected $26,000 cash on an account receivable. May 15 Paid $30,000 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 67,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed $115,000 cash by giving the bank a 30-day, 10% note. May 28 Borrowed $140,000 cash by signing a long-term secured note. May 29 Used the $255,000 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 $1,200,000 of current assets, a current ratio of 2.50:1, and an acid - test ratio of 1.40:1. 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 $45,000 for $130,000 cash. May 10 Collected $26,000 cash on an account receivable. May 15 Paid $30,000 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 67,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed $115,000 cash by giving the bank a 30-day, 10% note. May 28 Borrowed $140,000 cash by signing a long-term secured note. May 29 Used the $255,000 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
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Transcribed Image Text:Plum Corporation began the month of May with $1,200,000 of current assets, a current ratio of 2.50:1, and
an acid - test ratio of 1.40:1. 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 $45,000 for $130,000 cash. May 10 Collected $26,000 cash on an account
receivable. May 15 Paid $30,000 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
67,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27
Borrowed $115,000 cash by giving the bank a 30-day, 10% note. May 28 Borrowed $140,000 cash by
signing a long-term secured note. May 29 Used the $255,000 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.
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