Calculate the new current ratio and working capital

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Question - The chief financial officer (CFO) of Myeneke Corporation requested that the accounting department prepare a preliminary balance sheet on December 30, 2022, so that the CFO could get an idea of how the company stood. He knows that certain 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.

Myeneke Corporation Balance Sheet December 30, 2022

Current assets

Cash $25,000

Accounts receivable 30,000

Prepaid insurance 5,000 $60,000

Equipment (net) 200,000

Total assets $260,000

Current liabilities

Accounts payable $20,000

Salaries and wages payable 10,000 $30,000

Long-term liabilities

Notes payable 80,000

Total liabilities 110,000

Stockholders' equity

Common stock 100,000

Retained earnings 50,000 150,000

Total liabilities and stockholders' equity $260,000

Required - Based on the results in (a), the CFO requested that $20,000 of cash be used to pay off the balance of the accounts payable account on December 31, 2022. Calculate the new current ratio and working capital after the company takes these actions.

Reference no: EM132671797

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