Keener Incorporated had the following transactions occur involving current assets and current liabilities during February 2017.

Feb. 3 Accounts receivable of $15,000 are collected.

7 Equipment is purchased for $28,000 cash.

11 Paid $3,000 for a 3-year insurance policy.

14 Accounts payable of $12,000 are paid.

18 Cash dividends of $5,000 are declared.

Additional information:

1. As of February 1, 2017, current assets were $110,000, and current liabilities were $50,000.

2. As of February 1, 2017, current assets included $15,000 of inventory and $2,000 of prepaid expenses.

Instructions

(a) Compute the current ratio as of the beginning of the month and after each transaction.

(b) Compute the acid-test ratio as of the beginning of the month and after each transaction.

Answer rating: 100% (QA)

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