Question

On June 30, 2018, Jordan Company’s total current assets were $503,500 and its total current liabilities...

On June 30, 2018, Jordan Company’s total current assets were $503,500 and its total current liabilities were $273,000. On July 1, 2018, Jordan issued a short-term note to a bank for $40,600 cash.

Required

  1. Compute Jordan’s working capital before and after issuing the note.

  2. Compute Jordan’s current ratio before and after issuing the note. (Round your answers to 2 decimal places.)

Before the transaction After the transaction
a. Working Capital
b. Current Ratio
Business   Accounting   
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Homework Answers

Answer #1

(a)-Jordan’s working capital before and after issuing the note.

Working Capital before issuing the note

Working Capital before issuing the note = Total current assets – Total current liabilities

= $503,500 - $273,000

= $230,500

Working Capital after issuing the note

Working Capital after issuing the note = Total current assets – Total current liabilities

= [$503,500 + $40,600] – [$273,000 + $40,600]

= $544,100 - $303,600

= $230,500

(b)-Jordan’s current ratio before and after issuing the note.

Jordan’s current ratio before issuing the note

Jordan’s current ratio before issuing the note = Total current assets / Total current liabilities

= $503,500 / $273,000

= 1.84

Jordan’s current ratio after issuing the note

Jordan’s current ratio after issuing the note = Total current assets / Total current liabilities

= $544,100 / $313,600

= 1.74

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