Question

The bond indenture for the 10-year, 8% debenture bonds dated January 2, 20Y8, required working capital of $200,000, a current ratio of 2.0, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 20Y9, the three measures were computed as follows:

1.	Current assets:
		Cash		$186,000
		Temporary investments		232,500
		Accounts receivable (net)		372,000
		Inventories		294,500
		Prepaid expenses		77,500
		Intangible assets		46,500
		Property, plant, and equipment		837,000
			Total current assets (net)			$2,046,000
	Current liabilities:
		Accounts and short-term notes payable		$189,000
		Accrued liabilities		216,000
			Total current liabilities			(405,000)
	Working capital					$1,641,000
2.	Current ratio			5.1		$2,046,000 ÷ $405,000
3.	Quick ratio			5.4		$1,023,000 ÷ $189,000

a. There are errors in the calculation of the three measures of current position analysis. Determine the correct amounts. Round ratios to two decimal places.

Working capital
Current ratio
Quick ratio

Answer 1