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Plum Corporation began the month of May with $1,000,000 of current assets, a current ratio of 2.30:1, and an acid-test ratio of 1.50:1. During the

Plum Corporation began the month of May with $1,000,000 of current assets, a current ratio of 2.30:1, and an acid-test ratio of 1.50:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

May 2 Purchased $75,000 of merchandise inventory on credit.
8 Sold merchandise inventory that cost $50,000 for $145,000 cash.
10 Collected $25,000 cash on an account receivable.
15 Paid $27,500 cash to settle an account payable.
17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account.
22 Declared a $1 per share cash dividend on its 57,000 shares of outstanding common stock.
26 Paid the dividend declared on May 22.
27 Borrowed $90,000 cash by giving the bank a 30-day, 10% note.
28 Borrowed $110,000 cash by signing a long-term secured note.
29 Used the $200,000 cash proceeds from the notes to buy new machinery.

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Transaction Beginning May 2 Current Assets Quick Assets Current Liabilities Current Ratio Acid-Test Ratio Working Capital $ 1,000,000 $ 652,174 $ 434,783 2.30 1.50 $ 565,217 Balance May 8 Balance May 10 Balance May 15 Balance May 17 Balance May 22 Balance May 26 Balance May 27 Balance May 28 Balance May 29 Balance

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