Q1:Denna company's working capital accounts at December 31, 19x6, aregiven below:Cash$ 50,000Marketable securities...30,000Accounts receivable (net).200,000Inventory..Prepaid expenses..Accounts payable.Notes due within one year210,00010,000150,00030,000Accrued liabilities20,000During 19x7, Denna Company completed the following transactions:x. Paid a cash dividend previously declared, $12,000.a. Issued additional shares of capital stock for cash, $100,000.b. Sold inventory costing $50,000 for $80,000, on account.c. Wrote off uncollectible accounts in the amount of $10,000.d. Declared a cash dividend, $ 15,000.e. Paid accounts payable, $ 50,000.f. Borrowed cash on a short-term note with the bank, $35,000.g. Sold inventory costing $15,000 for $10,000 cash.h. Purchased inventory on account, $60,0000.i. Paid off all short-term notes due, $30,000.j. Purchased equipment for cash, $15,000.k. Sold marketable securities costing $18,000 for cash, $15,000.I. Collected cash on accounts receivable, $80,000.Required:1- Compute the following amounts and ratios as of December 31,19x6a. Working capitalb. Current ratioc. Acid-test ratio2- For 19x7, indicate the effect of each of the transactions given above on workingcapital, the current ratio and the acid-test ratio. Give the effect in terms of increase,decrease, or none. Item x is given below as an example of the format to use:The effect onTransactionsWorking capitalCurrent ratioAcid-test ratio(x)NoneIncreaseincrease

Solution: Introduction: Current Ratio is a measure of short term debt paying ability of a company…

2- For 19x7, indicate the effect of each of the transactions given above on working capital, the current ratio and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item x is given below as an example of the format to use: The effect on Transactions Working capital Current ratio Acid-test ratio (x) None Increase increase

2- For 19x7, indicate the effect of each of the transactions given above on working capital, the current ratio and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item x is given below as an example of the format to use: The effect on Transactions Working capital Current ratio Acid-test ratio (x) None Increase increase

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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