Business, 16.10.2020 19:01 goldenarrow
Plum Corporation began the month of May with $1,400,000 of current assets, a current ratio of 1.90:1, and an acid-test ratio of 1.70:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).
May 2 Purchased $75,000 of merchandise inventory on credit.
8 Sold merchandise inventory that cost $55,000 for $150,000 cash.
10 Collected $26,000 cash on an account receivable.
15 Paid $29,500 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 $120,000 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 $255,000 cash proceeds from the notes to buy new machinery.
Required
Prepare a table showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital, after each transaction. Round ratios to two decimals.
Answers: 1
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Plum Corporation began the month of May with $1,400,000 of current assets, a current ratio of 1.90:1...
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