Math Problem Statement
The bond indenture for the 10-year, 8% debenture bonds, dated January 2, 20Y8, required working capital of $200,000, a current ratio of 2.0, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 20Y9, the three measures were computed as follows:
Current assets: Cash
$120,000 Temporary investments
150,000 Accounts receivable (net)
240,000 Inventories
190,000 Prepaid expenses
50,000 Intangible assets
30,000 Property, plant, and equipment
540,000 Total current assets (net) $1,320,000 Current liabilities: Accounts and short-term notes payable
$440,000 Accrued liabilities
160,000 Total current liabilities (600,000) Working capital $ 720,000 2.
Current ratio
2.2 $1,320,000 ÷ $600,000
Quick ratio
1.5 $660,000 ÷ $440,000
a. There are errors in the calculation of the three measures of current position analysis. Determine the correct amounts. Round ratios to two decimal places.
Working capital
$fill in the blank 1
Current ratio fill in the blank 2
Quick ratio fill in the blank 3
Solution
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Math Problem Analysis
Mathematical Concepts
Financial Analysis
Working Capital Management
Liquidity Ratios
Formulas
Working Capital = Total Current Assets - Total Current Liabilities
Current Ratio = Total Current Assets / Total Current Liabilities
Quick Ratio = Quick Assets / Total Current Liabilities
Theorems
-
Suitable Grade Level
Professional
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