Answered: Data pertaining to the current position…

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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Question

Data pertaining to the current position of Forte Company follow:

Cash	$440,000
Marketable securities	175,000
Accounts and notes receivable (net)	335,000
Inventories	700,000
Prepaid expenses	44,000
Accounts payable	180,000
Notes payable (short-term)	230,000
Accrued expenses	290,000

Required:

Compute (A) the working capital, (B) the current ratio, and (C) the quick ratio. Round ratios to one decimal place.

Compute the working capital, the current ratio, and the quick ratio after each of the following transactions and record the results in the appropriate columns of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round ratios to one decimal place.

A.	Sold marketable securities at no gain or loss, $80,000.
B.	Paid accounts payable, $120,000.
C.	Purchased goods on account, $130,000.
D.	Paid notes payable, $105,000.
E.	Declared a cash dividend, $140,000.
F.	Declared a common stock dividend on common stock, $50,000.
G.	Borrowed cash from bank on a long-term note, $200,000.
H.	Received cash on account, $140,000.
I.	Issued additional shares of stock for cash, $595,000.
J.	Paid cash for prepaid expenses, $12,000.

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