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To Compute: the updated
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Explanation of Solution
Current ratio:
Current ratio is used to determine the relationship between current assets and current liabilities. Current ratio is determined by dividing current assets and current liabilities. The ideal current ratio is 2:1.
Formula:
Following is the prevailing current ratio:
Transaction 1:
Following is the updated current ratio for the sale made on merchandise for $12,000 on short term credit for $15,000.
Hence, the updated current ratio for the sale made on merchandise for $12,000 on short term credit for $15,000 is 2.01.
Working note:
Calculate the value of updated current asset.
Transaction 2:
Following is the updated current ratio for the declared but did not pay dividends of $50,000.
Hence, the updated current ratio for the declared but did not pay dividends of $50,000 is 1.68.
Working note:
Calculate the value of updated current liabilities.
Transaction 3:
Following is the updated current ratio for the paid rent amount of $12,000.
Hence, the updated current ratio for the paid rent amount of $12,000 is 1.68.
Working note:
Calculate the value of updated current assets.
Transaction 4:
Following is the updated current ratio for thepayment of previously declared dividends $50,000.
Hence, the updated current ratio for thepayment of previously declared dividends $50,000 is 1.81.
Working note:
Calculate the value of updated current assets.
Calculate the value of updated current liabilities.
Transaction 5:
Following is the updated current ratio for the collected an account receivable in the amount of $12,000.
Hence, the updated current ratio for the collected an account receivable in the amount of $12,000 is 1.81.
Working note:
Calculate the value of updated current assets.
Transaction 6:
Following is the updated current ratio for the reclassified of long –term debt as a current liability for $40,000.
Hence, the updated current ratio for the reclassified of long –term debt as a current liability for $40,000 is 1.56.
Working note:
Calculate the value of updated current liabilities.
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Chapter 13 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
- 6 pts financial accountingarrow_forwardRecently, Abercrombie & Fitch has been implementing a turnaround strategy since its sales had been falling for the past few years (11% decrease in 2014, 8% in 2015, and just 3% in 2016.) One part of Abercrombie's new strategy has been to abandon its logo-adorned merchandise, replacing it with a subtler look. Abercrombie wrote down $20.6 million of inventory, including logo-adorned merchandise, during the year ending January 30, 2016. Some of this inventory dated back to late 2013. The write-down was net of the amount it would be able to recover selling the inventory at a discount. The write-down is significant; Abercrombie's reported net income after this write-down was $35.6 million. Interestingly, Abercrombie excluded the inventory write-down from its non-GAAP income measures presented to investors; GAAP earnings were also included in the same report. Question: What impact, would the write-down of inventory have had on Abercrombie's current ratio?arrow_forwardNeed correct answer general accounting questionarrow_forward
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