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30 April, 07:14

Evans Inc. had current liabilities at April 30 of $69,400. The firm's current ratio at that date was 1.7. Required: Calculate the firm's current assets and working capital at April 30. Assume that management paid $14,300 of accounts payable on April 29. Calculate the current ratio and working capital at April 30 as if the April 29 payment had not been made. (Round "Current ratio" answer to 2 decimal places.) Identify the changes, if any, to working capital and the current ratio that would be caused by the April 29 paym

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  1. 30 April, 08:15
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    See explanation below

    Explanation:

    Given:

    Current liabilities at April 30 of $69,400

    Current ratio = 1.7

    a) Calculate the firm's current assets and working capital at April 30:

    Use the formula below to find the firm's current assets:

    current ratio = current asset/current liability

    current asset = current ratio * current liability

    current asset = 1.7 * $69,400

    Current asset = $117,980

    For working capital:

    Working capital = current assets-current liability

    = $117,980 - $69,400

    = $48,580

    Working capital = $48,580

    b) Calculate the current ratio and working capital at April 30 as if the April 29 payment had not been made:

    New current assets = $117,980 + $14,300 = $132,280

    New current liability = $69,400 + $14,300 = $83,700

    Working capital = $132,280 - $83,700 = $48,580

    Current ratio = 132,280/83700 = 1.58

    c) There is no change in the working capital.

    The current ratio will decrease by 0.12 (1.7 - 1.58) due to payment on 29th April
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