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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
EXERCISE 15–5 Selected Financial Measures for Short-Term Creditors [LO3]
Rightway Products had a current ratio of 2.5 on June 30 of the current year. On that date, the com- pany’s assets were as follows:
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Cash . . . . . . . . . . . . . . . . . . . . Â . |
$Â Â Â Â 80,000 |
Accounts receivable, net . . . . . . |
460,000 |
Inventory . . . . . . . . . . . . . . . . . . |
750,000 |
Prepaid expenses . . . . . . . . . . . |
10,000 |
Plant and equipment, net . . . . . . |
1,900,000 |
Total assets . . . . . . . . . . . . . . . . |
$3,200,000 |
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Required:
1.      What was the company’s working capital on June 30?
2.      What was the company’s acid-test ratio on June 30?
3.      The company paid an account payable of $100,000 immediately after June 30.
a.       What effect did this transaction have on working capital? Show computations.
b.       What effect did this transaction have on the current ratio? Show computations.
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