The bond indenture for the 10-year, 9% debenture bonds issued January 2, 2013, required working capital of
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The bond indenture for the 10-year, 9% debenture bonds issued January 2, 2013, required working capital of $100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 2014, the three measures were computed as follows:
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?
Transcribed Image Text:
1. Current assets: 48,000 Accounts and notes receivable (net)..... . ..120,000 36,000 24,000 124,800 55,200 $510,000 Current liabilities: Accounts and short-term notes payable..96,000 204,000 Total current liabilities.... 300,000 $210,000 $510,000$300,000 $115,200÷$ 96,000 Working capital 2. Current ratio....*... 1.7 1.2
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a The working capital current ratio and quick ratio are calculated incorrectly The working capital a...View the full answer
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Related Book For
Corporate Financial Accounting
ISBN: 978-1133952411
12th edition
Authors: Carl S. Warren, James M. Reeve, Jonathan E. Duchac
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