my work 7 Norsk Optronics. ALS, of Bergen, Norway, had a current ratio of 2 on J

Question

my work 7 Norsk Optronics. ALS, of Bergen, Norway, had a current ratio of 2 on June 30 of the current year On that date, the company's assets were: 0.5 Cash Accounts receivable, net Inventory Prepaid expenses Plant and equipment, net Total assets 71,000 370,000 740,090 8,000 1,830,000 $3,019,000 points eBook Required: 1. What was the company's working capital on June 30? 2 What was the company's acid-test ratio on June 30? (Round your answer to 2 decimal places.) 3. The company paid an account payable of $48,000 immediately after June 30 a. What effect did this transaction have on working capital? b. What effect did this transaction have on the current ratio? (Round your intermediate calculations to1 decimal place.) References 1. Working capital 2. Acid-test ratio 3a. Effect on working capital 3b. Effect on current ratio

Explanation / Answer

Current ratio of 2 means current assets are 2 times or double the current liabilities.

So If current assets = total assets - fixed assets =*3019000- 1830000= 1189000$

Current liabilities = 1189000/2= 594500$

Working capital = 1189000- 594500= 594500$

2. Acid test ratio =( current assets- inventory - prepaid expenses) /CL= 441000/594500= 0.742

Ans 2.

Payment of accounts payable reduces current liability by 48000$.

Working capital = 1189000 - 594500 - 48000 = 546500$

Acid test ratio = 441000/546500= 0.8069$

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