Question
Problem 17-3A Transactions, working capital, and liquidity ratios LO P3 Plum Corporation began the month of May with $900,000 of current assets, a current ratio
Problem 17-3A Transactions, working capital, and liquidity ratios LO P3
Plum Corporation began the month of May with $900,000 of current assets, a current ratio of 2.40:1, and an acid-test ratio of 1.40:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).
May | 2 | Purchased $70,000 of merchandise inventory on credit. | ||
8 | Sold merchandise inventory that cost $55,000 for $130,000 cash. | |||
10 | Collected $28,000 cash on an account receivable. | |||
15 | Paid $24,500 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 69,000 shares of outstanding common stock. | |||
26 | Paid the dividend declared on May 22. | |||
27 | Borrowed $105,000 cash by giving the bank a 30-day, 10% note. | |||
28 | Borrowed $135,000 cash by signing a long-term secured note. | |||
29 | Used the $240,000 cash proceeds from the notes to buy new machinery. |
Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Subtracted amount should be indicated with a minus sign.)
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