Plum Corporation began the month of May with $1,300,000 of current assets, a cur
ID: 2545334 • Letter: P
Question
Plum Corporation began the month of May with $1,300,000 of current assets, a current ratio of 1.90:1, and an acid-test ratio of 1.50:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $55,000 of merchandise inventory on credit. 8 Sold merchandise inventory that cost $50,000 for $130,000 cash. 10 Collected $27,000 cash on an account receivable 15 Paid $22,500 cash to settle an account payable 7 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. Declared a $1 per share cash dividend on its 60,000 shares of outstanding common stock 26 Paid the dividend declared on May 22. 27 Borrowed $95,000 cash by giving the bank a 30-day, 10% note 28 Borrowed $115,000 cash by signing a long-term secured note 29 Used the $210,000 cash proceeds from the notes to buy new machinery Required Prepare a table showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital, after each transaction. (Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount.Subtracted amount should be indicated with a minus sign.) CurrentQuick Assets Assets Liabilities Ratio Current Current Acid-Test Working ransaction Ratio Capital 1.50615,789 Beginning 1,300,000 1,026,316 $ 684,211 1.90 May 2 Balance 1,300,000 684,211 May 8 Balance May 10 Balance May 15 Balance May 17 Balance May 22 Balance May 26 Balance May 27 Balance May 28 Balance May 29Explanation / Answer
Current Quick Current Current Acide working Transaction assets Assets liabilities ratio test ratio capital Beginning 1,300,000 1026316 684211 1.9 1.5 615,789 2-May 55,000 55,000 Balances 1,355,000 1026316 739211 1.83 1.39 615,789 8-May 130,000 130,000 -50,000 balances 1,435,000 1156316 739211 1.94 1.56 695,789 10-May 27,000 27,000 -27,000 -27,000 Balance 1,435,000 1156316 739211 1.94 1.56 695,789 15-May -22,500 -22,500 -22,500 Balance 1,412,500 1133816 716711 1.97 1.58 695,789 17-May 0 0 0 balance 1,412,500 1133816 716711 1.97 1.58 695,789 22-May 0 0 0 Balances 1,412,500 1133816 716711 1.97 1.58 695,789 26-May -60,000 -60,000 0 Balances 1,352,500 1073816 716711 1.89 1.50 635,789 27-May 95,000 95,000 95,000 Balances 1,447,500 1168816 811711 1.78 1.44 635,789 28-May 115,000 115,000 0 Balances 1,562,500 1283816 811711 1.92 1.58 750,789 Ma 29 -210,000 -210,000 0 Balances 1,352,500 1073816 811711 1.67 1.32 540,789