Wolfe Hospitality Consulting had the following transactions occur involving current assets and current liabilities during February 2008:
Feb.
3 .... Accounts receivable of $15,000 are collected
7 .... Equipment is purchased for $28,000 cash
11 .... Paid $3,000 for a three-year insurance policy
14 .... Accounts payable of $12,000 are paid
18 .... Cash dividends of $5,000 are declared
Additional information:
1. As of February 1, 2008, current assets were $140,000, and current liabilities were $50,000.
2. As of February 1, 2008, current assets included $15,000 of inventory and $2,000 of prepaid expenses.
(a) Compute the current ratio as of the beginning of the month and after each transaction.
(b) Compute the acid-test ratio as of the beginning of the month and after each transaction.