Question Content Area

Current Position Analysis

The bond indenture for the 10-year, 8% debenture bonds dated January 2, 20Y8, required working capital of $1,461,400, a current ratio of 4.1, and a quick ratio of 2.7 at the end of each calendar year until the bonds mature. At December 31, 20Y9, the three measures were computed as follows:

1.	Current assets:
		Cash		$186,000
		Temporary investments		232,500
		Accounts receivable (net)		372,000
		Inventories		294,500
		Prepaid expenses		77,500
		Intangible assets		46,500
		Property, plant, and equipment		837,000
			Total current assets (net)			$2,046,000
	Current liabilities:
		Accounts and short-term notes payable		$224,000
		Accrued liabilities		256,000
			Total current liabilities			(480,000)
	Working capital					$1,566,000
2.	Current ratio			4.3		$2,046,000 $480,000
3.	Quick ratio			4.6		$1,023,000 $224,000

a. There are errors in the calculation of the three measures of current position analysis. Determine the correct amounts. Round ratios to two decimal places.

Working capital		$fill in the blank 1
Current ratio		fill in the blank 2
Quick ratio		fill in the blank 3

b. Based on the data, all of the following are true, regarding the bond indenture, except: