50.1K

Verified Solution

Link Copied!

Plum Corporation began the month of May with $900,000 of current assets, a current ratio of 2.60:1, and an acid-test ratio of 1.60:1. During the month, it completed the following transactions (the company uses a perpetual inventory system). May 2 Purchased $70,000 of merchandise inventory on credit. May 8 Sold merchandise inventory that cost $50,000 for $140,000 cash. May 10 Collected $22,000 cash on an account receivable. May 15 Paid $22,500 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 64,000 shares of outstanding common stock. May 26 Paid the dividend declared on May 22. May 27 Borrowed $90,000 cash by giving the bank a 30-day, 10\% note. May 28 Borrowed $110,000 cash by signing a long-term secured note. May 29 Used the $200,000 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. Note: Do not round intermediate calculations. Round your ratios to 2 decimal places and the working capitals to nearest dollar amount. Amounts to be deducted should be indicated with a minus sign. \begin{tabular}{|l|l|l|l|l|l|} \hline Balance after May 26 & & & & \\ \hline May 27 & & & & & \\ \hline May 27 & & & & & \\ \hline Balance after May 27 & & & & & \\ \hline May 28 & & & & & \\ \hline May 28 & & & & \\ \hline Balance after May 28 & & & & & \\ \hline May 29 & & & & & \\ \hline May 29 & & & & & \\ \hline Balance after May 29 & & & & \\ \hline \hline \end{tabular}

Answer & Explanation Solved by verified expert

See Answer