12

Current Position Analysis The bond indenture for the 10-year, 8% debenture bonds dated January 2, 2048, required working capital of $200,000, a current ratio of 2.0, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 2089, the three measures were computed as follows: 1. Current assets: Cash $222,000 Temporary investments 277,500 Accounts receivable (net) 444,000 Inventories 351,500 Prepaid expenses 92,500 Intangible assets 55,500 Property, plant, and equipment 999,000 Total current assets (net) $2,442,000 Current liabilities: Accounts and short-term notes payable $224,000 Accrued liabilities 256,000 Total current liabilities (480,000) Working capital $1,962,000 $2,442,000+ 2. Current ratio $480,000 $1,221,000 3. Quick ratio $224,000 a. There are errors in the calculation of the three measures of current position analysis. Determine the correct amounts. Round ratios to two decimal places. Working capital a. There are errors in the calculation of the three measures of current position analysis. Determine the correct amounts. Round ratios to two decimal places. Working capital Current ratio Quick ratio b. Based on the data, all of the following are true, regarding the bond indenture, except