Evans, Inc., had current liabilities at November 30 of $137,400. The firm\'s cur

Question

Evans, Inc., had current liabilities at November 30 of $137,400. The firm's current ratio at that date was 1.8. Required: (a) Calculate the firm's current assets and working capital at November 30. (Omit the "$" sign in your response.) Current assets: $ Working capital: $ (b) Assume that management paid $30,600 of accounts payable on November 29. Calculate the current ratio and working capital at November 30 as if the November 29 payment had not been made. (Round your current ratio answer to two decimal places. Omit the "$" sign in your response.) Working capital: $ Current ratio: (c) Indicate the changes, if any, to working capital and the current ratio that would be caused by the November 29 payment. Working capital: not affected/increased/decreased Current ratio: increased/decreased/not affected

Explanation / Answer

a) current ratio = current assets /current liabilities current assets = current ratio*current liabilities =1.8*137,400 = $247,320 (answer) current assets = current liabilities +working capital Working capital = 247,320 -137,400 =$109,920 (answer) b) since the amount paid = $30,600 so current assets before payment = 247,320+30,600 = $277,920 liabilities before payment = 137,400 +30,600 =$168,000 current ratio = 277,920/168,000 = 1.65 (answer) c) working capital not affected by the payment(answer) current ratio is decreases to 1.65 from 1.80 (answer)

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