Question

Use the following to answer questions 1 – 7:

Marcalo Company has the following partial Financial Statement accounts

(dollars in thousands)

                                                                      Year 2             Year 1

Cash and marketable securities                     200                  180

Accounts Receivable                                      190                  160

Inventory                                                         120                  120

Prepaid Expenses                                            70                    80

Plant and Equipment                                     1,850              1,790

Accounts Payable                                            170                  170

Accrued Short-Term Liabilities                          60                    60

Notes Payable, Short-Term                              130                  130

Bonds Payable                                                490                   500

Sales                                                              2,130

Cost of Goods Sold                                        1,490   

Compute the following: (Show your work)

1. Marcalo Company’s working capital at the end of Year 2.

a. 149

b. 220

c. 240

d. 190

2. Current ratio at the end of Year 2.

a. 1.61

b. 1.22

c. 2.4

d. 1.31

3. Acid-test ratio at the end of Year 2

a. 1.10

b. 1.20

c. 1.08

d. 2.10

Use the following to answer questions 1 – 7:

Marcalo Company has the following partial Financial Statement accounts

(dollars in thousands)

                                                                      Year 2             Year1

Cash and marketable securities                     200                  180

Accounts Receivable                                      190                  160

Inventory                                                         120                  120

Prepaid Expenses                                            70                    80

Plant and Equipment                                     1,850              1,790

Accounts Payable                                            170                  170

Accrued Short-Term Liabilities                          60                    60

Notes Payable, Short-Term                              130                  130

Bonds Payable                                                490                   500

Sales                                                              2,130

Cost of Goods Sold                                        1,490   

Compute the following: (Show your work)

1. Marcalo Company’s working capital at the end of Year 2.

a. 149

b. 220

c. 240

d. 190

2. Current ratio at the end of Year 2.

a. 1.61

b. 1.22

c. 2.4

d. 1.31

3. Acid-test ratio at the end of Year 2

a. 1.10

b. 1.20

c. 1.08

d. 2.10

Answer 1

Solution to part 1. Working capital at end of year 2 = Current asset - current liability = Current asset = 200+190+120+70 = 580 Current liability = 170+60+130= 360. So, working capital = 580 - 360 = 220

Therefore , answer is b. 220

Solution to part b. Current test ratio = Current asset / current liability = 580/360 = 1.61. So, the answer is a.

Solution to part c . Acid test ratio.= Current asset - inventory - prepaid expense / current liability = 580 - 120- 70 / 360 = 390 / 360 = 1.08 .So, the answer is c. 1.08