Current assets totaled $54,000 and the current ratio was 1.5. Assume that the following transactions were completed: (1) purchased merchandise for $7,000 on short-term credit and (2) purchased a delivery truck for $12,000, paid $3,000 cash, and signed a two-year interest-bearing note for the balance. Compute the cumulative current ratio after each transaction.

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13-02-2020
Business

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Current assets totaled $54,000 and the current ratio was 1.5. Assume that the following transactions were completed: (1) purchased merchandise for $7,000 on short-term credit and (2) purchased a delivery truck for $12,000, paid $3,000 cash, and signed a two-year interest-bearing note for the balance. Compute the cumulative current ratio after each transaction.

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andromache andromache · Answer 1 · 2020-02-18T12:19:47+01:00

Answer:

1. 1.42 times

2. 1.35 times

Explanation:

As we know that

Current ratio = Current assets ÷ Current liabilities

So, the current liabilities is

= $54,000 ÷ 1.5

= $36,000

Now based on the transactions, the current ratio equal to

1. Current ratio = Current assets ÷ Current liabilities

where,

Current assets = $54,000 + $7,000 = $61,000

Current liabilities = $36,000 + $7,000 = $43,000

So, the current ratio is

= $61,000 ÷ $43,000

= 1.42 times

2. Current ratio = Current assets ÷ Current liabilities

where,

Current assets = $61,000 - $3,000 = $58,000

Current liabilities = $36,000 + $7,000 = $43,000

So, the current ratio is

= $58,000 ÷ $43,000

= 1.35 times

topeadeniran2 topeadeniran2 · Answer 2 · 2021-11-24T09:52:14+01:00

The current ratio for case 1 is 1.42 while the current ratio for case 2 is 1.35.

From the information given, the current ratio for case 1 will be:

= (54000 + 7000) / (36000 + 7000)

= 1.42

The current ratio for case 2 will be:

= (54000 + 7000 - 3000) / (36000 + 7000)

= 58000 / 45000

= 1.35

Therefore, the current ratio for case 1 is 1.42 while the current ratio for case 2 is 1.35.

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