Exercise 15-12 Selected Financial Measures for Assessing Liquidity [LO15-2]

Norsk Optronics, ALS, of Bergen, Norway, had a current ratio of 2 on June 30 of the current year. On that date, the companys assets were:

Cash	$	80,000
Accounts receivable, net		410,000
Inventory		720,000
Prepaid expenses		10,000
Plant and equipment, net		1,840,000
Total assets	$	3,060,000

Required:

1.	What was the companys working capital on June 30?

2.	What was the companys acid-test ratio on June 30? (Round your answer to 2 decimal places.)

3.	The company paid an account payable of $45,000 immediately after June 30.

a.

What effect did this transaction have on working capital?

	Working capital would increase.
	Working capital would decrease.
	Working capital would not be affected.

b.

What effect did this transaction have on the current ratio?

	Current ratio would increase.
	Current ratio would decrease.
	Current ratio would not be affected.