Selected amounts from Reingold Company’s balance sheet from the beginning of the

Question

Selected amounts from Reingold Company’s balance sheet from the beginning of the year follow:

Wrote off uncollectible accounts in the amount of $13,600 reducing the accounts receivable balance accordingly.

Paid off all short-term notes due, $191,500

Compute the following amounts and ratios as of the beginning of the year: Working Capital, Current Ratio, Acid test ractio.

Selected amounts from Reingold Company’s balance sheet from the beginning of the year follow:

  Cash $ 79,000   Marketable Securities $ 16,500   Accounts receivable, net $ 371,600   Inventory $ 483,400   Prepaid expenses $ 14,300   Plant and equipment, net $ 1,040,000   Accounts payable $ 216,200   Accrued liabilities $ 68,100   Notes due within one year $ 118,000   Bonds payable in five years $ 149,000

During the year, the company completed the following transactions:

x. Purchased inventory on account, $56,750. a. Declared a cash dividend, $39,000. b. Paid accounts payable, $114,400. c. Collected cash on accounts receivable, $89,900. d. Purchased equipment for cash, $82,200. e. Paid a cash dividend previously declared, $39,000. f. Borrowed cash on a short-term note with the bank, $73,500. g. Sold inventory costing $77,200 for $109,000, on account. h.

Wrote off uncollectible accounts in the amount of $13,600 reducing the accounts receivable balance accordingly.

i. Sold marketable securities costing $16,500 for cash, $12,600. j. Issued additional shares of common stock for cash, $218,000. k.

Paid off all short-term notes due, $191,500

Compute the following amounts and ratios as of the beginning of the year: Working Capital, Current Ratio, Acid test ractio.

Explanation / Answer

Current assets =79000+16500+371600+483400+14300

=964800

Current liabilities=216200+68100+118000=402300

Working capital = current assets - current liabilities

=964800-402300

=562500

Current ratio=current assets/current liabilities

=964800/402300

=2.4

Acid test ratio= current assets-inventory-prepaid expense/current liabilities

=(964800-483400-14300)/402300

=1.2

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