Problem 11-15 (Algo) Review problem-understanding liquidity measures LO 11-1 Assume that the current ratio for Arch Company is 3.0, its acid-test ratio is 1.5, and its working capital is $360,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? Note: Do not round intermediate calculations. b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? Note: Do not round intermediate calculations. c. If the firm collects an account receivable of $118,000, what will its new current ratio and working capital be? Note: Round "Current ratio" to 1 decimal place. d. If the firm pays an account payable of $57,000, what will its new current ratio and working capital be? Note: Do not round intermediate calculations. Round "Current ratio" to 1 decimal place. e. If the firm sells inventory that was purchased for $50,000 at a cash price of $55,000, what will its new acid-test ratio be? Note: Do not round intermediate calculations. Round your answer to 1 decimal place. a. Current liabilities b. Merchandise inventory c. Current ratio c. Working capital d. Current ratio d. Working capital e. Acid-test ratio
Problem 11-15 (Algo) Review problem-understanding liquidity measures LO 11-1 Assume that the current ratio for Arch Company is 3.0, its acid-test ratio is 1.5, and its working capital is $360,000. Answer each of the following questions independently, always referring to the original information. Required: a. How much does the firm have in current liabilities? Note: Do not round intermediate calculations. b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise Inventory, how much does the firm have in Merchandise Inventory? Note: Do not round intermediate calculations. c. If the firm collects an account receivable of $118,000, what will its new current ratio and working capital be? Note: Round "Current ratio" to 1 decimal place. d. If the firm pays an account payable of $57,000, what will its new current ratio and working capital be? Note: Do not round intermediate calculations. Round "Current ratio" to 1 decimal place. e. If the firm sells inventory that was purchased for $50,000 at a cash price of $55,000, what will its new acid-test ratio be? Note: Do not round intermediate calculations. Round your answer to 1 decimal place. a. Current liabilities b. Merchandise inventory c. Current ratio c. Working capital d. Current ratio d. Working capital e. Acid-test ratio
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Problem 11-15 (Algo) Review problem-understanding liquidity measures LO 11-1
Assume that the current ratio for Arch Company is 3.0, its acid-test ratio is 1.5, and its working capital is $360,000. Answer each of the
following questions independently, always referring to the original information.
Required:
a. How much does the firm have in current liabilities?
Note: Do not round intermediate calculations.
b. If the only current assets shown on the balance sheet for Arch Company are Cash, Accounts Receivable, and Merchandise
Inventory, how much does the firm have in Merchandise Inventory?
Note: Do not round intermediate calculations.
c. If the firm collects an account receivable of $118,000, what will its new current ratio and working capital be?
Note: Round "Current ratio" to 1 decimal place.
d. If the firm pays an account payable of $57,000, what will its new current ratio and working capital be?
Note: Do not round intermediate calculations. Round "Current ratio" to 1 decimal place.
e. If the firm sells inventory that was purchased for $50,000 at a cash price of $55,000, what will its new acid-test ratio be?
Note: Do not round intermediate calculations. Round your answer to 1 decimal place.
a. Current liabilities
b. Merchandise inventory
c. Current ratio
c. Working capital
d. Current ratio
d. Working capital
e. Acid-test ratio
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VIEWStep 4: Calculation of new current ratio and working capital
VIEWStep 5: Calculation of new current ratio and working capital
VIEWStep 6: Calculation of new acid test ratio
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