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Wilson Company had a current ratio of 3.2:1 at the end of 2015. The asset section of the company's balance sheet is provided below: Required:
Wilson Company had a current ratio of 3.2:1 at the end of 2015. The asset section of the company's balance sheet is provided below: Required: 1) Compute Wilson Company's end-of-year working capital. 2) Compute the company's quick (acid-test) ratio. 3) The company has a debt agreement with its bank that authorizes the bank to call in its loan to the company if the company's current ratio falls below 3:1 as of the last day of any month during the term of the loan. During January 2015, the company engaged in the three following transactions: (a) Collected $100,000 on account; (b) Purchased inventory on account, $50,000 (c) Paid accounts payable, $60,000 Will the company be in default after completing all three of these transactions? Justify your answer. PROBLEM 7 Wilson Company had a current ratio of 3.2:1 at the end of 2015. The asset section of the company's balance sheet is provided below: 0000 Cash Accounts receivable 350,000 Less allowance for doubtful accounts 0.000 330,000 Inventory 535,000 Prepaid expenses Property, plant & equipment, net Total assets $2,000,000 Required: 1) Compute Wilson Company's end-of-year working capital. 2) Compute the company's quick (acid-test ratio. 3) The company has a debt agreement with its bank that authorizes the bank to call in its loan to the company if the company's current ratio falls below 3:1 as of the last day of any month during the term of the loan. During January 2015, the company engaged in the three following transactions: (a) Collected S100,000 on account; (b) Purchased inventory on account, S50,000 (c) Paid accounts payable, S60,000 Will the company be in default after completing all three of these transactions? Justify your
Wilson Company had a current ratio of 3.2:1 at the end of 2015. The asset section of the company's balance sheet is provided below:
Required:
1) Compute Wilson Company's end-of-year working capital.
2) Compute the company's quick (acid-test) ratio.
3) The company has a debt agreement with its bank that authorizes the bank to call in its loan to the company if the company's current ratio falls below 3:1 as of the last day of any month during the term of the loan. During January 2015, the company engaged in the three following transactions:
(a) Collected $100,000 on account;
(b) Purchased inventory on account, $50,000
(c) Paid accounts payable, $60,000
Will the company be in default after completing all three of these transactions? Justify your answer.
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