14. A firm had Current Assets of 7 5,00,000. It paid Current Liabilities of * 1,00,000 and the Current Ratio
became 2 : 1. Determine Current Liabilities and Working Capital before and after the payment was
made
Answers
Answer:
Before the payment
Working Capital = Current Assets less Current Liabilities
Working Capital = Rs 750,000 less Rs 425,000 = Rs 325,000
Explanation:
After the payment
Current Ratio = Current Assets/Current Liabilities
2 = (Rs 750,000 less Rs 100,000)/Current Liabilities
Current Liabilities = Rs 325,000
Working Capital = Current Assets less Current Liabilities
Working Capital = Rs 650,000 less Rs 325,000 = Rs 325,000
Before the payment
Current Assets = Rs 750,000
After the payment
Current Assets = Rs 750,000 less Rs 100,000 = Rs 650,000
Before the payment
Current Liabilities = Current Liabilities after payment add Rs 100,000
Current Liabilities = Rs 325,000 add Rs 100,000 = Rs 425,000
Before the payment
Working Capital = Current Assets less Current Liabilities
Working Capital = Rs 750,000 less Rs 425,000 = Rs 325,000