E10-5A. Current ratio and working capital. (LO 3)

Calculate the current ratio and the amount of working capital for Albert’s Hotels for the years given in the following comparative balance sheets. Although 2 year c is not much of a trend, what is your opinion of the direction of these ratios?

Albert Hotels Inc. Balance Sheet At December 31, 2008 and 2007

2008

2007

Current assets;

Cash

$98,000

$ 90,000

Accounts receivable net

1 10,000

1 16,000

Inventory

170,000

160,000

Prepaid expenses

18,000

16,000

Total current assets

396,000

382,000

Equipment net

184,000

160,000

Total assets

$580,000

$542,000

Total current liabilities

$206,000

$223,000

Long- term liabilities

1 19,000

1 17,000

Total liabilities

325,000

340,000

Common stockholder’s equity

90,000

90,000

Retained earnings

155,000

112,000

Total liabilities and stockholder’s equity

$580,000

$542,000