Problem 11-12 (Algo) Effect of transactions on liquidity measures LO 1 Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows: Cash $ 48,000 Marketable securities 135,000 Accounts receivable, net 165,000 Inventory 187,500 Prepaid expenses 21,000 Total current assets $ 556,500 Accounts payable $ 108,000 Other accrued liabilities 26,400 Short-term debt 48,000 Total current liabilities $ 182,400 Required: Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019. Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2020. Prepare journal entries for the below transactions and Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, − for decrease, and (NE) for no effect. Credit sales for the year amounted to $360,000. The cost of goods sold was $234,000. Collected accounts receivable, $378,000. Purchased inventory on account, $252,000. Issued 750 shares of common stock for $27 per share. Wrote off $10,500 of uncollectible accounts using the allowance for bad debts. Declared and paid a cash dividend, $30,000. Sold marketable securities costing $39,000 for $46,500 in cash. Recorded insurance expense for the year, $18,000. The premium for the policy was paid in June 2019. Borrowed cash on a short-term bank loan, $15,000. Repaid principal of $60,000 and interest of $4,500 on a long-term bank loan.

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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Problem 1Q

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Problem 11-12 (Algo) Effect of transactions on liquidity measures LO 1

Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows:


Cash	$	48,000
Marketable securities		135,000
Accounts receivable, net		165,000
Inventory		187,500
Prepaid expenses		21,000
Total current assets	$	556,500
Accounts payable	$	108,000
Other accrued liabilities		26,400
Short-term debt		48,000
Total current liabilities	$	182,400

Required:

Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019.
Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2020. Prepare journal entries for the below transactions and Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, − for decrease, and (NE) for no effect.
1. Credit sales for the year amounted to $360,000. The cost of goods sold was $234,000.
2. Collected accounts receivable, $378,000.
3. Purchased inventory on account, $252,000.
4. Issued 750 shares of common stock for $27 per share.
5. Wrote off $10,500 of uncollectible accounts using the allowance for bad debts.
6. Declared and paid a cash dividend, $30,000.
7. Sold marketable securities costing $39,000 for $46,500 in cash.
8. Recorded insurance expense for the year, $18,000. The premium for the policy was paid in June 2019.
9. Borrowed cash on a short-term bank loan, $15,000.
10. Repaid principal of $60,000 and interest of $4,500 on a long-term bank loan.

Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, - for deci
(NE) for no effect.
Working
Capital
Current
Acid-Test
Ratio
Transaction/Event
Ratio
0. Example: Paid accounts payable, $585,000.
1. Credit sales for the year amounted to $360,000. The cost of goods sold was $234,000.
NE
+
2. Collected accounts receivable, $378,000.
3. Purchased inventory on account, $252,000.
4. Issued 250 shares of common stock for $54 per share.
5. Wrote off $10,500 of uncollectible accounts using the allowance for bad debts.
6. Declared and paid a cash dividend, $30,000.
7. Sold marketable securities costing $39,000 for $46,500 in cash.
8. Recorded insurance expense for the year, $18,000. The premium for the policy was paid in June 2019.
9. Borrowed cash on a short-term bank loan, $15,000.
10. Repaid principal of $60,000 and interest of $4,500 on a long-term bank loan.

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