Question

SportChek is Canada’s largest retailer of sporting goods and sports apparel and footwear, with over 130 stores across the country. Assume one of the SportChek stores reported current assets of $87,000 and its current ratio was 1.76. Assume that the following transactions were completed:

1. Paid $6,100 on accounts payable.
2. Purchased a delivery truck for $9,500 cash.
3. Wrote off a bad account receivable for $2,100.
4. Paid previously declared dividends in the amount of $24,000.

Required:
Compute the updated current ratio. (Round your answers to 2 decimal places.)

Answer 1

Updated current ratio = 2.34

Alternative solution assuming writing off accounts receivable do not affect current receivable because allowance method is used.= 2.45

Please use alternative answer if the original answer do not match

	Current assets	Current liabilities	Current ratio
Balance before transactions	$        87,000	$              49,432	1.76
Transactions
Paid $6,100 on accounts payable.	$        (6,100)	$              (6,100)
Purchased a delivery truck for $9,500 cash.	$        (9,500)
Wrote off a bad account receivable for $2,100.	$        (2,100)
Paid previously declared dividends in the amount of $24,000.	$     (24,000)	$            (24,000)
Updated Balance	$        45,300	$              19,332	2.34