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Business Accounting Connect Access Card for Financial Accounting: Information and Decisions

Current ratio refers to the ratio of current assets and current liabilities. This ratio shows the resources a company has to pay off its short term debts and obligations. Acid-test ratio is computed by dividing quick assets and current liabilities. Working capital is the difference between current assets and current liabilities. To prepare: A table to show the P Corporation’s current ratio, acid-test ratio and working capital after each transaction. Transaction Current assets Quick assets Current liabilities Current ratio Acid-test ratio Working capital Beginning $700000 $308000 $280000 2.50 1.10 $420000 May 2 50000 50000 Balance 750000 308000 330000 2.27 0.93 420000 May 8 110000 110000 (55000) Balance 805000 418000 330000 2.44 1.27 475000 May 10 20000 20000 (20000) (20000) Balance 805000 418000 330000 2.44 1.27 475000 May 15 (22000) (22000) (22000) Balance 783000 396000 308000 2.54 1.29 475000 May 17 0 0 0 0 0 0 Balance 783000 396000 308000 2.54 1.29 475000 May 22 50000 Balance 783000 396000 358000 2.19 1.11 425000 May 26 (50000) (50000) (50000) Balance 733000 346000 308000 2.38 1.12 425000 May 27 100000 100000 100000 Balance 833000 446000 408000 2.04 1.09 425000 May 28 80000 80000 0 Balance 913000 526000 408000 2.24 1.29 505000 May 29 (180000) (180000) Balance 733000 346000 408000 1.80 0.85 325000 Calculation of current liabilities in the beginning- Current ratio = Current assets Current liabilities 2 .50 = 700000 Current liabilities Current liabilities = 700000 2.50 Current liabilities = 280000 Calculation of quick assets in the beginning- Acid-test ratio = Quick assets Current liabilities 1 .1 = Quick assets 280000 Quick assets = 308000 Calculation of working capital- Working capital = Current assets − Current liabilities = 700000 − 280000 = 420000

Current ratio refers to the ratio of current assets and current liabilities. This ratio shows the resources a company has to pay off its short term debts and obligations. Acid-test ratio is computed by dividing quick assets and current liabilities. Working capital is the difference between current assets and current liabilities. To prepare: A table to show the P Corporation’s current ratio, acid-test ratio and working capital after each transaction. Transaction Current assets Quick assets Current liabilities Current ratio Acid-test ratio Working capital Beginning $700000 $308000 $280000 2.50 1.10 $420000 May 2 50000 50000 Balance 750000 308000 330000 2.27 0.93 420000 May 8 110000 110000 (55000) Balance 805000 418000 330000 2.44 1.27 475000 May 10 20000 20000 (20000) (20000) Balance 805000 418000 330000 2.44 1.27 475000 May 15 (22000) (22000) (22000) Balance 783000 396000 308000 2.54 1.29 475000 May 17 0 0 0 0 0 0 Balance 783000 396000 308000 2.54 1.29 475000 May 22 50000 Balance 783000 396000 358000 2.19 1.11 425000 May 26 (50000) (50000) (50000) Balance 733000 346000 308000 2.38 1.12 425000 May 27 100000 100000 100000 Balance 833000 446000 408000 2.04 1.09 425000 May 28 80000 80000 0 Balance 913000 526000 408000 2.24 1.29 505000 May 29 (180000) (180000) Balance 733000 346000 408000 1.80 0.85 325000 Calculation of current liabilities in the beginning- Current ratio = Current assets Current liabilities 2 .50 = 700000 Current liabilities Current liabilities = 700000 2.50 Current liabilities = 280000 Calculation of quick assets in the beginning- Acid-test ratio = Quick assets Current liabilities 1 .1 = Quick assets 280000 Quick assets = 308000 Calculation of working capital- Working capital = Current assets − Current liabilities = 700000 − 280000 = 420000

Solution Summary: The author explains current ratio, acid-test ratio and working capital after each transaction.

Connect Access Card for Financial Accounting: Information and Decisions

Connect Access Card for Financial Accounting: Information and Decisions

8th Edition

ISBN: 9781259662966

Author: John J Wild

Publisher: McGraw-Hill Education

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Chapter 13 Solutions

Connect Access Card for Financial Accounting: Information and Decisions

Ch. 13 - Explain the difference between financial reporting...Ch. 13 - Prob. 2DQ Ch. 13 - Prob. 3DQ Ch. 13 - Prob. 4DQ Ch. 13 - Prob. 5DQ Ch. 13 - Prob. 6DQ Ch. 13 - Prob. 7DQ Ch. 13 - Prob. 8DQ Ch. 13 - Prob. 9DQ Ch. 13 - Prob. 10DQ

Ch. 13 - Prob. 11DQ Ch. 13 - Prob. 12DQ Ch. 13 - Prob. 13DQ Ch. 13 - Prob. 14DQ Ch. 13 - Prob. 15DQ Ch. 13 - Prob. 16DQ Ch. 13 - Prob. 17DQ Ch. 13 - Financial reporting Cl. Which of the following...Ch. 13 - Prob. 2QS Ch. 13 - Prob. 3QS Ch. 13 - Prob. 4QS Ch. 13 - Prob. 5QS Ch. 13 - Prob. 6QS Ch. 13 - Prob. 7QS Ch. 13 - Prob. 8QS Ch. 13 - Prob. 9QS Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - Prob. 8E Ch. 13 - Risk and capital structure analysis P3 Refer to...Ch. 13 - Prob. 10E Ch. 13 - Prob. 11E Ch. 13 - Prob. 12E Ch. 13 - Prob. 14E Ch. 13 - Prob. 15E Ch. 13 - Prob. 1PSA Ch. 13 - Prob. 2PSA Ch. 13 - Prob. 3PSA Ch. 13 - Prob. 4PSA Ch. 13 - Prob. 5PSA Ch. 13 - Prob. 6PSA Ch. 13 - Prob. 1PSB Ch. 13 - Prob. 2PSB Ch. 13 - Prob. 3PSB Ch. 13 - Prob. 4PSB Ch. 13 - Prob. 5PSB Ch. 13 - Prob. 6PSB Ch. 13 - Prob. 13SP Ch. 13 - Prob. 1BTN Ch. 13 - Prob. 2BTN Ch. 13 - Prob. 3BTN Ch. 13 - Prob. 7BTN Ch. 13 - Prob. 9BTN

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