The bond indenture for the 10-year, 912 % debenture bonds dated January 2, 2007, required working capital

The bond indenture for the 10-year, 91–2 % debenture bonds dated January 2, 2007, required working capital of $350,000, a current ratio of 1.5, and a quick ratio of 1 at the end of each calendar year until the bonds mature. At December 31, 2008, the three measures were computed as follows:

1.

2. Current ratio = 1.68 ($1,050,000 ÷ $625,000)
3. Quick ratio = 1.52 ($570,000 ÷ $375,000)
a. List the errors in the determination of the three measures of current position analysis.
b. Is the company satisfying the terms of the bondindenture?

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Current assets: Cash Marketable securities Accounts and notes receivable ( Inventories Prepaid expenses Goodwill $275,000 123,000 172,000 295,000 35,000 150,000 net) Total current assets 1,050,000 Current liabilities: Accounts and short-term notes payable Accrued liabilities 5375,000 250,000 Total current liabilities 625,000 425,000 Working capital