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ACCT2020 The chief financial officer (CFO) of Padilla Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2012, so that the CFO could get an idea of how the company stood. He knows that certain of its debt agreements with its creditors require the company to maintain a current ratio of at least 2:1. The preliminary balance sheet is as follows.

 

PADILLA CORP.

Balance Sheet

December 30, 2012

Current assets                                                                                  Current liabilities                             

Cash      $31,722                                                                 Accounts payable            $26,722

Accounts receivable       21,088                                                   Salaries payable                                16,088           $42,810

Prepaid insurance            11,190                   $64,000 Long-term liabilities                       

Property, plant, and equipment (net)    201,558                                                                                                                                                                                                                 Notes payable                                             81,190

                                                                                                                Total liabilities                                              124,000

                                                                                                                Stockholders\' equity                      

      Total assets                                                  $265,558              Common stock                  100,000

                                                                                                                Retained earnings           41,558           141,558

                                                                                                         Total liabilities and stockholders equity$265,558

Required:

(a)          Calculate the current ratio

working capital

 (b)         Based on the results in (a), the CFO requested that $26,722 of cash be used to pay off the balance of the accounts payable account on December 31, 2012. Calculate the new current ratio and working capital after the company takes these actions. 

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