Question

Evans Inc. had current liabilities at April 30 of $74,100. The firm's current ratio at that date was 1.7.Required:Calculate the firm's current assets and working capital at April 30.Assume that management paid $17,200 of accounts payable on April 29. Calculate the current ratio and working capital at April 30 as if the April 29 payment had not been made. (Round "Current ratio" answer to 2 decimal places.)

Answer 1

Answer: Current asset S10,586

Working capital is-S63,514

Current ratio 1 to 7

Step-by-step explanation:

Current ratio= current assets to current liability =1..7

1.7=x to 74100

1/7=x/74100

7x=74100

X=74100/7

Current asset=S10,586

Working capital is current assets minus current liability

S10,586 minus S74100

Working capital is -S63,514

Current ratio if the payment has not been made is 1 to 7

Answer 2

* The firm's current assets and working capital at April 30:

+ Current asset $125,970

+ Working capital: $51,870

* The current ratio and working capital at April 30 as if the April 29 payment had not been made:

+ Current ratio: 1.57

+ Working Capital: $51,870

Step-by-step explanation:

* The firm's current assets and working capital at April 30:

We have Current asset/ Current Liabilities = Current ratio <=> Current asset = Current liabilities x current ratio = 74,100 x 1.7 = $125,970.

Working capital = Current asset - Current Liabilities = 125,970 - 74,100 = $51,870.

* The current ratio and working capital at April 30 as if the April 29 payment had not been made:

- Current asset will be 125,970 + 17,200 = $143,170; Current Liabilities will be 74,100 + 17,200 = $91,300 ( as cash has not be deducted for account payable settlement, as a result, account payable is still maintained balance of 17,200 higher than the scenario where the payable had been settled).

=> Current ratio = 143,170/91,300 = 1.57; Working Capital = 143,170 - 91,300 = $51,870.