Fad Foods Ltd completed a series of transactions, which are listed below. Before the transactions, both the current and quick asset ratios were greater than 1. The cash account has a debit balance. Indicate the effect of each of the transactions listed below on the ratio listed opposite it. For each transaction, state whether the ratio would increase, decrease or have no effect. Treat each transaction independently. Transaction1 Redeemed debentures by issuing ordinary shares2 Purchased inventory on credit34567Sold inventory for cash with a 40 per cent mark-up on costIssued additional ordinary shares for cashCollected an account receivable balancePaid accounts payablePaid accounts payableRatioReturn on equityQuick ratioCurrent ratioDebt-to-equity ratioDebtors turnoverReturn on assetsProfit margin

Name: Fad Foods Ltd completed a series of transactions, which are listed bel
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Description: Fad Foods Ltd completed a series of transactions, which are listed below. Before the transactions, both the current and quick asset ratios were greater than 1. The cash account has a debit balance. Indicate the effect of each of the transactions list

Since the question contains multiple independent transactions, we will do the first three…

Answered: 1 2 3 Transaction Redeemed debentures…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Fad Foods Ltd completed a series of transactions, which are listed below. Before the transactions, both the current and quick asset ratios were greater than 1. The cash account has a debit balance. Indicate the effect of each of the transactions listed below on the ratio listed opposite it. For each transaction, state whether the ratio would increase, decrease or have no effect. Treat each transaction independently.

Transaction
1 Redeemed debentures by issuing ordinary shares
2 Purchased inventory on credit
3
4
5
6
7
Sold inventory for cash with a 40 per cent mark-up on cost
Issued additional ordinary shares for cash
Collected an account receivable balance
Paid accounts payable
Paid accounts payable
Ratio
Return on equity
Quick ratio
Current ratio
Debt-to-equity ratio
Debtors turnover
Return on assets
Profit margin

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