Question

Plum Corporation began the month of May with $ 700,000 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 $ 50,000 of merchandise inventory on credit.
8 Sold merchandise inventory that cost $ 55,000 for $ 110,000 cash.
10 Collected $ 20,000 cash on an account receivable.
15 Paid $ 22,000 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 50,000 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 $ 80,000 cash by signing a long- term secured note.
29 Used the $ 180,000 cash proceeds from the notes to buy new machinery.

Required
Prepare a table showing Plum’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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