To Compute: the updated
Explanation of Solution
Current ratio:
Current ratio is used to determine the relationship between current assets and current liabilities. Current ratio is determined by dividing current assets and current liabilities. The ideal current ratio is 2:1.
Formula:
Following is the prevailing current ratio:
Transaction 1:
Following is the updated current ratio for the sale made on merchandise for $12,000 on short term credit for $15,000.
Hence, the updated current ratio for the sale made on merchandise for $12,000 on short term credit for $15,000 is 2.01.
Working note:
Calculate the value of updated current asset.
Transaction 2:
Following is the updated current ratio for the declared but did not pay dividends of $50,000.
Hence, the updated current ratio for the declared but did not pay dividends of $50,000 is 1.68.
Working note:
Calculate the value of updated current liabilities.
Transaction 3:
Following is the updated current ratio for the paid rent amount of $12,000.
Hence, the updated current ratio for the paid rent amount of $12,000 is 1.68.
Working note:
Calculate the value of updated current assets.
Transaction 4:
Following is the updated current ratio for thepayment of previously declared dividends $50,000.
Hence, the updated current ratio for thepayment of previously declared dividends $50,000 is 1.81.
Working note:
Calculate the value of updated current assets.
Calculate the value of updated current liabilities.
Transaction 5:
Following is the updated current ratio for the collected an account receivable in the amount of $12,000.
Hence, the updated current ratio for the collected an account receivable in the amount of $12,000 is 1.81.
Working note:
Calculate the value of updated current assets.
Transaction 6:
Following is the updated current ratio for the reclassified of long –term debt as a current liability for $40,000.
Hence, the updated current ratio for the reclassified of long –term debt as a current liability for $40,000 is 1.56.
Working note:
Calculate the value of updated current liabilities.
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Chapter 13 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
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