Park Corporation began the month of May with $650,000 of current assets, a current ratio of 2.50:1,

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Park Corporation began the month of May with $650,000 of current assets, a current ratio of 2.50:1, and an acid-test ratio of 1.10:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

May 2 Purchased $75,000 of merchandise inventory on credit.

8 Sold merchandise inventory that cost $58,000 for $103,000 cash.

10 Collected $19,000 cash on an account receivable.

15 Paid $21,000 cash to settle an account payable.

17 Wrote off a $3,000 bad debt against the Allowance for Doubtful Accounts account.

22 Declared a $1 per share cash dividend on its 40,000 shares of outstanding common stock.

26 Paid the dividend declared on May 22.

27 Borrowed $75,000 cash by giving the bank a 30-day, 10% note.

28 Borrowed $90,000 cash by signing a long-term secured note.

29 Used the $165,000 cash proceeds from the notes to buy new machinery.


Required

Prepare a table showing Park’s

(1) Current ratio,

(2) Acid-test ratio, and

(3) Working capital, after each transaction. Round ratios to two decimals

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Fundamental Accounting Principles

ISBN: 978-0078110870

20th Edition

Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta

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