The bond indenture for the 10-year, 912 % debenture bonds dated January 2, 2007, required working capital

Question:

The bond indenture for the 10-year, 91–2 % debenture bonds dated January 2, 2007, required working capital of $350,000, a current ratio of 1.5, and a quick ratio of 1 at the end of each calendar year until the bonds mature. At December 31, 2008, the three measures were computed as follows:

1.


The bond indenture for the 10-year, 91–2 % debenture bonds


2. Current ratio = 1.68 ($1,050,000 ÷ $625,000)
3. Quick ratio = 1.52 ($570,000 ÷ $375,000)
a. List the errors in the determination of the three measures of current position analysis.
b. Is the company satisfying the terms of the bondindenture?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Financial Accounting An Integrated Statements Approach

ISBN: 978-0324312119

2nd Edition

Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren

Question Posted: