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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 company’s assets were as

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:

 

Cash . . . . . . . . . . . . . . . . . . . .  .

$     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

 

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.

Jun 28 2020 View more View Less

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