Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 2.50:1, and an acid-test rat

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Plum Corporation Began The Month Of May With 700 000 Of Current Assets A Current Ratio Of 2 50 1 And An Acid Test Rat 1 (57.9 KiB) Viewed 61 times

Plum Corporation began the month of May with $700,000 of current assets, a current ratio of 2.50:1, and an acid-test ratio of 1.10:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $50,000 of merchandise inventory on credit. May 8 Sold merchandise inventory that cost $55,000 for $110,000 cash. May 18 Collected $20,000 cash on an account receivable. May 15 Paid $22,000 cash to settle an account payable. May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account. May 22 Declared a $1 per share cash dividend on its 50,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed $100,000 cash by giving the bank a 30-day, 10 % note. May 28 Borrowed $80,000 cash by signing a long-term secured note. May 29 Used the $180,000 cash proceeds from the notes to buy new machinery. Required: Complete the table below showing Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction. (Do not round Intermediate calculations. Round your ratlos to 2 decimal places and the working capitals to nearest dollar amount. Amounts to be deducted should be Indicated with a minus sign.) Transaction Beginning May 2 Current Assets Quick Assets Current Liabilities 700,000 $ 308,000 $ 50,000 Current Ratio Acid-Test Ratio Working Capital 420,000 $ 280,000 2.50 1.10 $ 50,000 May 2 Balance after May 2 750,000 308,000 330,000 2.27 May 8 110,000 May 8 (55,000) Balance after May 8 May 10 May 10 Balance after May 10 May 15 May 15 Balance after May 15 May 17 May 17 Balance after May 17 May 22 May 22 Balance after May 22 May 26 May 26 Balance after May 26 May 27 May 27 Balance after May 27 May 28 May 28 Balance after May 28