Denna Company’s working capital accounts at the beginning of the year follow: Cash $ 64,000 Marketable securities $ 27,400 Accounts receivable, net $ 335,600 Inventory $ 444,400 Prepaid expenses $ 6,800 Accounts payable $ 189,200 Notes due within one year $ 88,000 Accrued liabilities $ 54,600 During the year, Denna Company completed the following transactions: Ex. Paid a cash dividend previously declared, $24,000. Issued additional shares of common stock for cash, $188,000. Sold inventory costing $65,200 for $94,000, on account. Wrote off uncollectible accounts in the amount of $7,600, reducing the accounts receivable balance accordingly. Declared a cash dividend, $24,000. Paid accounts payable, $90,400. Borrowed cash on a short-term note with the bank, $51,000. Sold inventory costing $21,300 for $14,200 cash. Purchased inventory on account, $45,500. Paid off all short-term notes due, $139,000. Purchased equipment for cash, $70,200. Sold marketable securities costing $17,400 for cash, $14,500. Collected cash on accounts receivable, $73,400. Required: 1. Compute the following amounts and ratios as of the beginning of the year: a. Working capital. b. Current ratio. c. Acid-test ratio. 2. 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period. REQUIRED 1 Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2 decimal places.) a. Working capital b. Current ratio c. Acid-test ratio REQUIRED 2 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period. The Effect on Transaction Working Capital Current Ratio Acid-Test Ratio Ex. Paid a cash dividend previously declared None Increase Increase a. Issued capital stock for cash b. Sold inventory at a gain c. Wrote off uncollectible accounts d. Declared a cash dividend e. Paid accounts payable f. Borrowed on a short-term note g. Sold inventory at a loss h. Purchased inventory on account i. Paid short-term notes j. Purchased equipment for cash k. Sold marketable securities at a loss l. Collected accounts receivable

Denna Company’s working capital accounts at the beginning of the year follow: Cash $ 64,000 Marketable securities $ 27,400 Accounts receivable, net $ 335,600 Inventory $ 444,400 Prepaid expenses $ 6,800 Accounts payable $ 189,200 Notes due within one year $ 88,000 Accrued liabilities $ 54,600 During the year, Denna Company completed the following transactions: Ex. Paid a cash dividend previously declared, $24,000. Issued additional shares of common stock for cash, $188,000. Sold inventory costing $65,200 for $94,000, on account. Wrote off uncollectible accounts in the amount of $7,600, reducing the accounts receivable balance accordingly. Declared a cash dividend, $24,000. Paid accounts payable, $90,400. Borrowed cash on a short-term note with the bank, $51,000. Sold inventory costing $21,300 for $14,200 cash. Purchased inventory on account, $45,500. Paid off all short-term notes due, $139,000. Purchased equipment for cash, $70,200. Sold marketable securities costing $17,400 for cash, $14,500. Collected cash on accounts receivable, $73,400. Required: 1. Compute the following amounts and ratios as of the beginning of the year: a. Working capital. b. Current ratio. c. Acid-test ratio. 2. 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period. REQUIRED 1 Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2 decimal places.) a. Working capital b. Current ratio c. Acid-test ratio REQUIRED 2 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period. The Effect on Transaction Working Capital Current Ratio Acid-Test Ratio Ex. Paid a cash dividend previously declared None Increase Increase a. Issued capital stock for cash b. Sold inventory at a gain c. Wrote off uncollectible accounts d. Declared a cash dividend e. Paid accounts payable f. Borrowed on a short-term note g. Sold inventory at a loss h. Purchased inventory on account i. Paid short-term notes j. Purchased equipment for cash k. Sold marketable securities at a loss l. Collected accounts receivable

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

Denna Company’s working capital accounts at the beginning of the year follow:


Cash	$	64,000
Marketable securities	$	27,400
Accounts receivable, net	$	335,600
Inventory	$	444,400
Prepaid expenses	$	6,800
Accounts payable	$	189,200
Notes due within one year	$	88,000
Accrued liabilities	$	54,600

During the year, Denna Company completed the following transactions:

Ex. Paid a cash dividend previously declared, $24,000.

Issued additional shares of common stock for cash, $188,000.
Sold inventory costing $65,200 for $94,000, on account.
Wrote off uncollectible accounts in the amount of $7,600, reducing the accounts receivable balance accordingly.
Declared a cash dividend, $24,000.
Paid accounts payable, $90,400.
Borrowed cash on a short-term note with the bank, $51,000.
Sold inventory costing $21,300 for $14,200 cash.
Purchased inventory on account, $45,500.
Paid off all short-term notes due, $139,000.
Purchased equipment for cash, $70,200.
Sold marketable securities costing $17,400 for cash, $14,500.
Collected cash on accounts receivable, $73,400.

Required:

1. Compute the following amounts and ratios as of the beginning of the year:

a. Working capital.

b. Current ratio.

c. Acid-test ratio.

2. 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period.

REQUIRED 1

Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2 decimal places.)


a.	Working capital
b.	Current ratio
c.	Acid-test ratio

REQUIRED 2

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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period.

		The Effect on
	Transaction	Working Capital	Current Ratio	Acid-Test Ratio
Ex.	Paid a cash dividend previously declared	None	Increase	Increase
a.	Issued capital stock for cash
b.	Sold inventory at a gain
c.	Wrote off uncollectible accounts
d.	Declared a cash dividend
e.	Paid accounts payable
f.	Borrowed on a short-term note
g.	Sold inventory at a loss
h.	Purchased inventory on account
i.	Paid short-term notes
j.	Purchased equipment for cash
k.	Sold marketable securities at a loss
l.	Collected accounts receivable

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