The chief financial officer (CFO) of Grienke Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2014, so that the CFO could get an idea of how the company stood. He knows that certain debt agreements with its creditors require the company to maintain a current ratio of at least 2:1.The preliminary balance sheet is as follows.

Instructions
(a) Calculate the current ratio and working capital based on the preliminary balance sheet.
(b) Based on the results in (a), the CFO requested that $20,000 of cash be used to pay off the balance of the accounts payable account on December 31, 2014.
Calculate the new current ratio and working capital after the company takes these actions.
(c) Discuss the pros and cons of the current ratio and working capital as measures of liquidity.
(d) Was it unethical for the CFO to take thesesteps?

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GRIENKE CORP Balance Sheet December 30, 2014 Current assets Current liabilities Cash Accounts receivable Prepaid insurance $25,000 30,000 Accounts payable Salaries and wages payable 10,000 30,000 20,000 5,000 60,000 Long-term liabilities Notes payable 80,000 Equipment (net) Total assets 200,000 $260,000 Total liabilities 110,000 Stockholders' equity Common stock Retained earnings 100,000 50,000 150,000 Total liabilities and stockholders' equity $260,000