
Introduction:
To calculate:
The new current ratio after considering the recent transactions.

Answer to Problem 11E
The updated current ratio is 1.63:1.
Explanation of Solution
Given:
Current assets = $54,000
Current ratio = 1.80:1
- Merchandise purchased for $6,000 on account Purchase of merchandise on account will increase the current assets as well as the current liabilities by the same amount.
- Delivery truck purchased for $10,000 by paying $1,000 in cash and for the balanced amount signing a two years promissory note.
New Values
Current Assets = $54,000 + $6,000 = $60,000
Current liabilities = $30,000 + $6,000 = $36,000
New ratio:
Purchasing a delivery truck is a part of fixed asset so it will not impact the current assets. However, part of cash payment made for the truck will reduce the current asset. Signing a promissory note for a period of more than one year is a part of non-current liability. Therefore, it will not have any impact on the current liabilities.
New values:
Current assets = $60,000 - $1,000 = $59,000
Current liabilities = $36,000
New ratio:
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Chapter 13 Solutions
Managerial Accounting
- Pluto Manufacturing reported the following: • • Direct labor: $7,500 Direct materials used: $3,000 Manufacturing overhead: $950 Cost of goods manufactured: $22,000 Ending work-in-process inventory: $2,200 What is the beginning work-in-process inventory?arrow_forwardProvide accurate answerarrow_forwardDirect materials:450, Direct labor:330arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
