Required:1. Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2decimal places.)a. Working capitalb. Current ratioc. Acid-test ratio2. Indicate the effect of each of the transactions given above on working capital, the current ratio, and theacid-test ratio. Give the effect in terms of increase, decrease, or none. Item (x) is given as an example:Consider each transaction independently and indicate their effects as compared to the ratios andamounts at the beginning of the period.The Effect onTransactionWorking CapitalCurrent RatioAcid-Test Ratiox. Paid a cash dividend previously declared NoneIncreaseIncreasea. Issued capital stock for cashb. Sold inventory at a gainc. Wrote off uncollectible accountsd. Declared a cash dividende. Paid accounts payablef. Borrowed on a short-term noteg. Sold inventory at a lossh. Purchased inventory on accounti. Paid short-term notes duej. Purchased equipment for cashk. Sold marketable securities at a loss1. Collected accounts receivable Denna Company's working capltal accounts at the beginning of the year followCashMarketable securitiesAccounts receivable, netInventoryPrepaid expensesAccounts payableNotes due within one yearAccrued liabilities$ 85,eee$ 25,600S 386,000$ 499, 000S 18, See$ 227,000$ 130,eee$ 73,500During the year, Denna Company completed the following transactions:x. Paid a cash dividend previously declared, $45,000.a. Issued additional shares of common stock for cash. $230,000.b Sold inventory costing $82.000 for $115,000, on accountc. Wrote off uncollectible accounts in the amount of $16,000, reducing the accounts recelvabie balance accordinglyd. Declared a cash dividend, $45.000.e Paid accounts payable, $124,000.f Borrowed cash on a short-term note with the bank, $82,500g. Sold inventory costing $19,500 for $13,000 cash.h. Purchased Inventory on account. $61.250.1. Pald off all short-term notes due, $212,500.J. Purchased equipment for cash, $87,000.k. Sold marketable securitles costing $15.600 for cash, $13,000.1. Collected cash on accounts recelvable. $96,500

Working capital is the capital or amount for day to day use in the business. Current ratio is the…

Denna Company's working capital accounts at the beginning of the year follow: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Accounts payable Notes due within one year Accrued 1iabilities $ 85,e00 $ 25,600 S 386,ee0 S 499,e00 $ 18, see $ 227, eee $ 130, eee $ 73,500 During the year, Denna Company completed the following transactions x. Pald a cash dividend previously deciared, $45.000. a. Issued additional shares of common stock for cash, $230,000. b. Sold inventory costing $82.000 for $115,000, on account. c. Wrote off uncollectible accounts In the amount of $16.000, reducing the accounts receivable balance accordingly. d. Declared a cash dividend, $45,000. e. Paid accounts payable, $124,000. f. Borrowed cash on a short-term note with the bank, $82.500. g. Sold inventory costing $19.500 for $13.000 cash. h. Purchased Inventory on account. $61.250. 1. Pald off all short-term notes due, $212.50. J. Purchased equtpment for cash, $87,000. k. Sold marketable securities costing $15,600 for cash, $13,000. 1. Collected cash on accounts receivable, $96,500

Denna Company's working capital accounts at the beginning of the year follow: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Accounts payable Notes due within one year Accrued 1iabilities $ 85,e00 $ 25,600 S 386,ee0 S 499,e00 $ 18, see $ 227, eee $ 130, eee $ 73,500 During the year, Denna Company completed the following transactions x. Pald a cash dividend previously deciared, $45.000. a. Issued additional shares of common stock for cash, $230,000. b. Sold inventory costing $82.000 for $115,000, on account. c. Wrote off uncollectible accounts In the amount of $16.000, reducing the accounts receivable balance accordingly. d. Declared a cash dividend, $45,000. e. Paid accounts payable, $124,000. f. Borrowed cash on a short-term note with the bank, $82.500. g. Sold inventory costing $19.500 for $13.000 cash. h. Purchased Inventory on account. $61.250. 1. Pald off all short-term notes due, $212.50. J. Purchased equtpment for cash, $87,000. k. Sold marketable securities costing $15,600 for cash, $13,000. 1. Collected cash on accounts receivable, $96,500

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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