Explanation Current ratio: Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company. Compute the prevailing current ratio: Current ratio= Current assets Current liabilities 1 .75= $88,000 x x= $88,000 1 .75 =$50,286 (1) Compute 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 .85 times Hence, the updated current ratio for the payment made on accounts payable for $6,000 is 1.85times Working note (1): Calculate the value of updated current asset. Updated current asset value= ( Present value of current asset − Accounts payable ) =$88,000 − $6,000 =$82,000 (2) Compute 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 .63 times Hence, the updated current ratio for the payment made for purchase of delivery truck for cash $10,000 is 1

6th Edition

ISBN: 9781260823875

Author: PHILLIPS

Publisher: MCGRAW-HILL CUSTOM PUBLISHING

See similar textbooks

Concept explainers

The Effect Of Prepaid Taxes On Assets And Liabilities

Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can resu…

Final Accounts

Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.

Ledger Posting

A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the a…

Trial Balance and Final Accounts

In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately…

Adjustment Entries

At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial repor…

Videos

Question

Chapter 13, Problem 13E

To determine

Calculate the updated current ratio of Incorporation G after each transaction.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 13, Problem 12E

Chapter 13, Problem 14E

Students have asked these similar questions

Hii tutor give me Answer

Which method classifies costs as variable or fixed?

Round your answer to the nearest whole percent

Chapter 13 Solutions

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...

Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12Q Ch. 13 - Prob. 13Q Ch. 13 - Prob. 14Q Ch. 13 - Prob. 15Q Ch. 13 - Prob. 16Q Ch. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MC Ch. 13 - Prob. 3MC Ch. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MC Ch. 13 - Prob. 7MC Ch. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MC Ch. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 5ME Ch. 13 - Prob. 6ME Ch. 13 - Prob. 7ME Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 10ME Ch. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 12ME Ch. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 8E Ch. 13 - Prob. 9E Ch. 13 - Prob. 10E Ch. 13 - Prob. 11E Ch. 13 - Prob. 12E Ch. 13 - Prob. 13E Ch. 13 - Prob. 14E Ch. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 1CP Ch. 13 - Prob. 2CP Ch. 13 - Prob. 3CP Ch. 13 - Prob. 4CP Ch. 13 - Prob. 5CP Ch. 13 - Prob. 6CP Ch. 13 - Prob. 7CP Ch. 13 - Prob. 1PA Ch. 13 - Prob. 2PA Ch. 13 - Prob. 3PA Ch. 13 - Prob. 4PA Ch. 13 - Prob. 5PA Ch. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PA Ch. 13 - Prob. 1PB Ch. 13 - Prob. 2PB Ch. 13 - Prob. 3PB Ch. 13 - Prob. 4PB Ch. 13 - Prob. 5PB Ch. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PB Ch. 13 - Prob. 1SDC Ch. 13 - Prob. 2SDC Ch. 13 - Prob. 5SDC Ch. 13 - Prob. 6SDC Ch. 13 - Prob. 7SDC Ch. 13 - Prob. 1CC

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.

Similar questions

SEE MORE QUESTIONS

Recommended textbooks for you

FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
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