Question

Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 1.80:1, and an acid-test ratio of 1.50:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).

May	2	Purchased $60,000 of merchandise inventory on credit.
	8	Sold merchandise inventory that cost $55,000 for $135,000 cash.
	10	Collected $26,000 cash on an account receivable.
	15	Paid $27,500 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 69,000 shares of outstanding common stock.
	26	Paid the dividend declared on May 22.
	27	Borrowed $85,000 cash by giving the bank a 30-day, 10% note.
	28	Borrowed $110,000 cash by signing a long-term secured note.
	29	Used the $195,000 cash proceeds from the notes to buy new machinery.

Required:

Prepare a table 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 Current Ratio Acid-Test Ratio Working Capital Beginning $700,000 $583,333 $388,889 1.80 1.50 $311,111 May 2 Balance 700,000 388,889 May 8 Balance May 10 Balance May 15 Balance May 17 Balance May 22 Balance May 26 Balance May 27 Balance May 28 Balance May 29 Balance

Answer 1