Question

Koto Corporation began the month of June with $ 300,000 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 $ 75,000 for $ 120,000 cash.
3 Collected $ 88,000 cash on an account receivable.
5 Purchased $ 150,000 of merchandise inventory on credit.
7 Borrowed $ 100,000 cash by giving the bank a 60-day, 10% note.
10 Borrowed $ 120,000 cash by signing a long- term secured note.
12 Purchased machinery for $ 275,000 cash.
15 Declared a $ 1 per share cash dividend on its 80,000 shares of outstanding common stock.
19 Wrote off a $ 5,000 bad debt against the Allowance for Doubtful Accounts account.
22 Paid $ 12,000 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, (3) Working capital after each transaction. Round ratios to two decimals.



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  • CreatedNovember 26, 2013
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