Menardo Corporation began the month of June with $600,000 of current assets, a c
ID: 2442536 • Letter: M
Question
Menardo Corporation began the month of June with $600,000 of current assets, a current ratio of 2.5:1, and an acid-test ratio of 1.4:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).June 1 Sold merchandise inventory that cost $150,000 for $240,000 cash.
3 Collected $176,000 cash on an account receivable.
5 Purchased $300,000 of merchandise inventory on credit.
7 Borrowed $200,000 cash by giving the bank a 60-day, 8% note.
10 Borrowed $240,000 cahs by signing a long-term secured note.
12 Purchased machinery for $550,000 cash.
15 Declared a $1 per share cash divedend on its 160,000 shares of outstanding common stock.
19 Wrote off a $10,000 bad debt against the Allowance for Doubtful Accounts account.
22 Paid $24,000 cash to settle an account payable.
30 Paid the dividend declared on June 15.
Required
Prepare a table showing the company's (1) current ratio, (2)acid-test ratio, and (3) working capital after each transaction. Round ratios to two decimals.
Explanation / Answer
Working Capital = Current assets - Current liabilities
current assets o/p c.assets 600000 ptofit on inventory 90000 cash collected on receivables 176000 merchanidised inventory 300000 current liabilities o/p c.liabilities 240000 purchased inventory on credit 300000 short term loans from bank 200000 1.current ratio 1.58 11.7 : 7.4 2.acide test ratio 1.17 86.6 : 74 3.working capital 426000 CA - CL