Reference no: EM133084797
Question - Plum Corporation began the month of May with $900,000 of current assets, a current ratio of 2.80:1, and an acid-test ratio of 1.40:1. During the month, it completed the following transactions (the company uses a perpetual inventory system).
May 2 Purchased $55,000 of merchandise inventory on credit.
May 8 Sold merchandise inventory that cost $50,000 for $155,000 cash.
May 10 Collected $24,000 cash on an account receivable.
May 15 Paid $27,000 cash to settle an account payable.
May 17 Wrote off a $5,000 bad debt against the Allowance for Doubtful Accounts account.
May 22 Declared a $1 per share cash dividend on its 60,000 shares of outstanding common stock.
May 26 Paid the dividend declared on May 22.
May 27 Borrowed $120,000 cash by giving the bank a 30-day, 10% note.
May 28 Borrowed $135,000 cash by signing a long-term secured note.
May 29 Used the $255,000 cash proceeds from the notes to buy new machinery.
Required - Determine the Plum's (1) current ratio, (2) acid-test ratio, and (3) working capital after each transaction.
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