Plum Corporation began the month of May with $1,300,000 of current assets, a current ratio of...

Transcribed Image Text:

Plum Corporation began the month of May with $1,300,000 of current assets, a current ratio of 2.00:1, and an acid-test ratio of 1.40:1. 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 $45,000 for $125,000 cash. 10 Collected $26,000 cash on an account receivable. 15 Paid $25,000 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 58,000 shares of outstanding common stock. 26 Paid the dividend declared on May 22. 27 Borrowed $110,000 cash by giving the bank a 30-day, 10% note. 28 Borrowed $130,000 cash by signing a long-term secured note. 29 Used the $240,000 cash proceeds from the notes to buy new machinery. Required: Complete the table below 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.) Transaction Current Assets Quick Assets Current Liabilities Beginning $ 1,300,000 $ 910,000 $ May 2 Balance May 8 Balance 650,000 Current Ratio Acid-Test Ratio Working Capital 1.40 $ 650,000 2.00 Plum Corporation began the month of May with $1,300,000 of current assets, a current ratio of 2.00:1, and an acid-test ratio of 1.40:1. 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 $45,000 for $125,000 cash. 10 Collected $26,000 cash on an account receivable. 15 Paid $25,000 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 58,000 shares of outstanding common stock. 26 Paid the dividend declared on May 22. 27 Borrowed $110,000 cash by giving the bank a 30-day, 10% note. 28 Borrowed $130,000 cash by signing a long-term secured note. 29 Used the $240,000 cash proceeds from the notes to buy new machinery. Required: Complete the table below 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.) Transaction Current Assets Quick Assets Current Liabilities Beginning $ 1,300,000 $ 910,000 $ May 2 Balance May 8 Balance 650,000 Current Ratio Acid-Test Ratio Working Capital 1.40 $ 650,000 2.00

Answer rating: 100% (QA)

The image contains a partially completed table for Plum Corporations financial transactions with the purpose of calculating the companys current ratio acidtest ratio and working capital after each tra... View the full answer