Plum Corporation began the month of May with $1,200,000 of current assets, a cur
ID: 2592223 • Letter: P
Question
Plum Corporation began the month of May with $1,200,000 of current assets, a current ratio of 2.60:1, 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 $65,000 of merchandise inventory on credit. 8 Sold merchandise inventory that cost $60,000 for $155,000 cash. 10 Collected $27,000 cash on an account receivable 15 Paid $27,000 cash to settle an account payable. 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. 22 Declared a $1 per share cash dividend on its 56,000 shares of outstanding common stock. 26 Paid the dividend declared on May 22. 27 Borrowed $100,000 cash by giving the bank a 30-day, 10% note. 28 Borrowed $120,000 cash by signing a long-term secured note. 29 Used the $220,000 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.)Explanation / Answer
Transaction Current Assets Quick Assets Current Liablities Current Ratio Acid Raio Working Capital Begining $ 1,200,000 $ 692,308 $ 461,358 2.60 1.50 $ 738,462 May 2 $ 65,000 - $ 65,000 Balance $ 1,265,000 $ 692,308 $ 526,538 2.40 1.31 $ 738,462 May 8 $ 95,000 $ 155000 - Balance $ 1,360,000 $ 847,308 $ 526,538 2.58 1.61 $ 833,462 May 10 - $ 27,000 - Balance $ 1,360,000 $ 874,308 $ 526,538 2.58 1.66 $ 833,462 May 15 ($ 27,000) ($ 27,000) ($ 27,000) Balance $ 1,333,000 $ 847,208 $ 499,538 2.67 1.70 $ 833,462 May 17 ($ 5,000) - - Balance $ 1,328,000 $ 847,308 $ 499,538 2.66 1.70 $ 828,462 May 22 - - $ 56,000 Balance $ 1,328,000 $ 847,308 $ 555,538 2.39 1.53 $ 772,462 May 26 ($ 56,000) ($ 56,000) ($ 56,000) Balance $ 1,272,000 $ 791,308 $ 499,538 2.55 1.58 $ 772,462 May 27 $ 100,000 $ 100,000 - Balance $ 1,372,000 $ 891,308 $ 499,538 2.75 1.78 $ 872,462 May 28 $ 120,000 $ 120,000 - Balance $ 1,492,000 $1,011,308 $ 499,538 2.99 2.02 $ 992,462 May 29 ($ 220,000) ($220,000) ($ 220,000) Balance $ 1,272,000 $ 791,308 $ 279,538 4.55 2.83 $ 992,462