Explanation Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1. Following is the prevailing current ratio: Current ratio= Current assets Current liabilities 1 .75= $88,000 x x= $88,000 1 .75 =$50,286 1) Following is the updated current ratio for the payment made on accounts payable for $6,000. Current ratio= Current asset Current liability = $82,000(1) $44,286 =1 .85Times Hence, the updated current ratio for the payment made on accounts payable for $6,000 is 1.85times Working note: Calculate the value of updated current asset. Updated current asset value= ( Present value of current asset -Accounts payable ) =$88,000-$6,000 =$82,000 (1) 2) Following is the updated current ratio for the payment made for purchase of delivery truck for cash $10,000. Current ratio= Current asset Current liability = $72,000(2) $44,286 =1 .63Times Hence, the updated current ratio for the payment made for purchase of delivery truck for cash $10,000 is 1

Connect 1 Semester Access Card for Fundamentals of Financial Accounting

5th Edition

ISBN: 9781259128547

Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby

Publisher: McGraw-Hill Education

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Chapter 13, Problem 13.13E

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To Calculate: Updated current ratio of Incorporation S after each transaction.

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Connect 1 Semester Access Card for Fundamentals of Financial Accounting

Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2Q Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5Q Ch. 13 - Prob. 6Q Ch. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...

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Updated current ratio of Incorporation S after each transaction.

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