Compute Valley Forge’s current ratio at December 31, 2008, and again at December 31, 2009. Did the…

(Learning Objective 6: Evaluating the current ratio) Valley Forge Corporation reported the following current accounts at December 31, 2008 (amounts in thousands):

Cash

$1,700

Receivables

5,600

Inventory

1,800

Prepaid expenses

800

Accounts payable

2,400

Unearned revenues

1,200

Accrued expenses payable

1,700

During 2009, Valley Forge completed these selected transactions:

• Sold services on account, $8,500.

• Depreciation expense, $400.

• Paid for expenses, $7,100.

• Collected from customers on account, $7,500.

• Accrued expenses, $300.

• Paid on account, $1,000.

• Used up prepaid expenses, $200.

Compute Valley Forge’s current ratio at December 31, 2008, and again at December 31, 2009. Did the current ratio improve or deteriorate during 2009? Comment on the level of the company’s current ratio.

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