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A04 Assignment 04

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ASSIGNMENT 04 A04 Intermediate Accounting I Directions: Be sure to make an electronic copy of your answer before submitting it to Ashworth College for grading. Unless otherwise stated, answer in compl... ete sentences, and be sure to use correct English spelling and grammar. Sources must be cited in APA format. Refer to the "Assignment Format" page for specific format requirements. Part A (40 points) Vince Corporation has current assets of $300,000 and current liabilities of $175,000. Compute the effect of each of the following transactions on Vince’s current ratio: a. Refinanced a $50,000 long-term mortgage with a short-term note. b. Purchasing $80,000 of merchandise inventory with short-term accounts payable. c. Paying $30,000 of short-term accounts payable. d. Collecting $40,000 of short-term accounts receivable. a. The refinancing of a $50,000 long-term mortgage with a short-term note would increase Vince's current liabilities, decreasing the current ratio to 1.33 (= $300,000  $225,000). b. Purchasing $80,000 of inventory with a short-term account payable would increase Vince's current assets to $380,000, and increase the current liabilities to $255,000, making the current ratio 1.49. c. Paying $30,000 of short-term accounts payable decreases both the current assets and liabilities by $30,000, making the current ratio 1.86. [Show More]

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