02 Jul The chief financial officer (CFO) of Sheffield Corp, accounting homework help
Question Description
The chief financial officer (CFO) of Sheffield Corp. requested that the accounting department prepare a preliminary balance sheet on December 30, 2017, 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.
Sheffield Corp.
Balance Sheet
December 30, 2017
Current assets
Cash $26,200
Accounts receivable 31,700
Prepaid insurance 6,100 $ 64,000
Equipment (net) 201,400
Total assets $265,400
Current liabilities
Accounts payable $ 21,200
Salaries and wages payable 11,700 $ 32,900
Long-term liabilities
Notes payable 81,100
Total liabilities 114,000
Stockholders’ equity
Common stock 100,000
Retained earnings 51,400 151,400
Total liabilities and stockholders’ equity $265,400
Calculate the current ratio and working capital based on the preliminary balance sheet. (Round Current Ratio to 1 decimal place, e.g. 0.7 : 1.)
Current ratio
:1
Working capital $
LINK TO TEXT
Based on the results in (a), the CFO requested that $21,200 of cash be used to pay off the balance of the accounts payable account on December 31, 2017. Calculate the new current ratio and working capital after the company takes these actions. (Round Current Ratio to 1 decimal place, e.g. 0.7 : 1.)
Current ratio
:1
Working capital $
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