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Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
Edition 9ISBN: 0073527068 Exercise 37
Step-by-step solution
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Step 1 of 5
a.?Working capital = (current assets - current liabilities) = CA - CL = $300,000
Current ratio = (current assets / current liabilities) = CA / CL = 2.0
Solution approach:
1) In the current ratio equation, multiply both sides by CL, giving:
CA = 2CL
2) In the working capital equation, substitute 2CL for CA, giving:
2CL - CL = $300,000
Current liabilities = $300,000
3) Current assets can be determined as: CA = 2CL = (2 * $300,000) = $600,000
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Step 2 of 5
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Step 5 of 5
Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall
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