Directions:Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.) Total Current Assets Current Ratio Effect on Net Income 4. A fixed asset is sold for less than book value. ++-5. A fixed asset is sold for more than book value. +++6. Merchandise is sold on credit +++7. Payment is made to trade creditors for previous purchases. -+08. A cash dividend is declared and paid. --09. Cash is obtained through short-term bank loans. +-010. Short-term notes receivable are sold at a discount. ---11. Marketable securities are sold below cost. ---12. Advances are made to employees. 00013. Current operating expenses are paid. ---14. Short-term promissory notes are issued to trade creditors in exchange for past due accounts payable.00015. 10-year notes are issued to pay off accounts payable.0+016. A fully depreciated asset is retired.00017. Accounts receivable are collected.00018. Equipment is purchased with short-term notes.0-019. Merchandise is purchased on credit.+-020. The estimated taxes payable are increased.0--Please provide explanation or justification on the effects of the transactions. Thank you

Explanation are as follows for above transaction.

Answered: Please provide explanation or…

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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Directions:

Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (−) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.)

	Total Current Assets	Current Ratio	Effect on Net Income



4. A fixed asset is sold for less than book value.	+	+	-
5. A fixed asset is sold for more than book value.	+	+	+
6. Merchandise is sold on credit	+	+	+
7. Payment is made to trade creditors for previous purchases.	-	+	0
8. A cash dividend is declared and paid.	-	-	0
9. Cash is obtained through short-term bank loans.	+	-	0
10. Short-term notes receivable are sold at a discount.	-	-	-
11. Marketable securities are sold below cost.	-	-	-
12. Advances are made to employees.	0	0	0
13. Current operating expenses are paid.	-	-	-
14. Short-term promissory notes are issued to trade creditors in exchange for past due accounts payable.	0	0	0
15. 10-year notes are issued to pay off accounts payable.	0	+	0
16. A fully depreciated asset is retired.	0	0	0
17. Accounts receivable are collected.	0	0	0
18. Equipment is purchased with short-term notes.	0	-	0
19. Merchandise is purchased on credit.	+	-	0
20. The estimated taxes payable are increased.	0	-	-

Please provide explanation or justification on the effects of the transactions. Thank you

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