37.—38. Assume that Pet Supplies Galore has the following values on its most rec
ID: 2801810 • Letter: 3
Question
37.—38. Assume that Pet Supplies Galore has the following values on its most recent Balance Sheet:
Account
Value
Cash
$175,200
Accounts Receivable
232,600
Inventory
435,000
Total Current Assets
842,800
Current Liabilities
$745,500
Using the information in the table shown above, calculate the “Current Ratio” for Pet Supplies Galore:
Now, assume that Pet Supplies Galore discovers that $50,000 of the $232,600 “Account Receivable” listed on its most recent Balance Sheet are uncollectible.The Senior Accountant at Pet Supplies Galore’s corporate office in Seattle, Washington removes these $50,000 of uncollectible accounts from the firm’s “Accounts Receivable” balance and expenses them on the Income Statement as a “Bad Debt Expense.”Following this adjustment, what is Pet Supplies Galore’s updated “Current Ratio?”
Account
Value
Cash
$175,200
Accounts Receivable
232,600
Inventory
435,000
Total Current Assets
842,800
Current Liabilities
$745,500
Explanation / Answer
Current ratio Current assets/Current liabilities 1.13 842800/745500 Updated Current ratio Current assets/Current liabilities 1.06 (842800-50000)/745500
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