Financial Accounting
9th Edition
ISBN: 9781259738692
Author: Libby
Publisher: MCG
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Chapter 13, Problem 13.9E
To determine
Analyse the impact of the given transactions on the
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E12-7 Analyzing the Impact of Selected Transactions on the Current Ratio LO12-8
Current assets for JC Inc. totalled $58,300, and the current ratio was 2.12. Assume that the following transactions were completed:
(1) Purchased merchandise for $6,300 on short-term credit.
(2) Purchased a delivery truck for $25,000-paid $8,450 cash and signed a two-year interest-bearing note for the balance.
Required:
1. Determine without computations if the current ratio will increase, decrease, or remain unchanged after each transaction.
Transaction (1)
Transaction (2)
Answer is complete and correct.
Impact on Current Ratio
Decrease
Decrease
2. Compute the current ratio after each transaction. (Round the final answers to 2 decimal places.)
Answer is complete but not entirely correct.
Current Ratio
1.91
2.03
Transaction (1)
Transaction (2)
Tabor Company has just prepared the following comparative annual financial statements for the current year:
TABOR COMPANY
Comparative Income Statement
For the Years Ended December 31
Sales revenue (one-half on credit)
Cost of goods sold.
Gross profit
Expenses (including $7,200 interest expense each year).
Pretax income
Income tax expense (30%)
Net income
Assets
Cash
Accounts receivable
Inventory
Property & equipment (net)
Total assets
Liabilities
Accounts payable
Income taxes payable
Note payable, long-term
Stockholders' equity
TABOR COMPANY
Comparative Balance Sheet
At December 31
Capital stock ($5 par value)
Retained earnings
Total liabilities and stockholders' equity
Current Year Prior Year
$ 198,000
$ 257,400
93,600
124,800
132,600
96,200
36,400
10,920
$ 25,480
104,400
72,000
32,400
9,720
$ 22,680
Current Year
$ 51,100
61,000
28,200
103,000
$ 243,300
$ 43,400
2,600
56,000
98,000
43,300
$ 243,300
Prior Year
$ 39,600
40,000
44,400
121,000
$ 245,000
$ 46,200
1,300
56,000
106,000…
Current Ratio Data:
Year 2018: 787.25%
Year 2019: 951.50%
Year 2020: 1105.00%
Year 2021:1553.51%
Year 2022:1540.03%
Question: which of the following transactions and events would result in an improvement in Current Ratio in year 2020?
receiving cash for unearned sales revenue
a cash receipt from a customer for amounts owing on goods previously sold on credit
acquiring cash proceeds from a 5-year interest-only bank loan
A and B only
A and C only
B and C only
All of the above
None of the above
Chapter 13 Solutions
Financial Accounting
Ch. 13 - Who are the primary users of financial statements?Ch. 13 - When considering an investment in stock, investors...Ch. 13 - How does product differentiation differ from cost...Ch. 13 - What are the two general methods for making...Ch. 13 - What are component percentages? Why are they...Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What do profitability ratios focus on? What is an...Ch. 13 - What do turnover ratios focus on? What is an...Ch. 13 - What do liquidity ratios focus on? What is an...Ch. 13 - What do solvency ratios focus on? What is an...
Ch. 13 - What do market ratios focus on? What is an example...Ch. 13 - Prob. 12QCh. 13 - Explain why rapid growth in total sales might not...Ch. 13 - A company has total assets of 500,000 and...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Prob. 4MCQCh. 13 - Prob. 5MCQCh. 13 - Prob. 6MCQCh. 13 - Prob. 7MCQCh. 13 - Prob. 8MCQCh. 13 - Prob. 9MCQCh. 13 - Prob. 10MCQCh. 13 - Prob. 13.1MECh. 13 - Prob. 13.2MECh. 13 - Prob. 13.3MECh. 13 - Computing the Financial Leverage Percentage...Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Prob. 13.8MECh. 13 - Prob. 13.9MECh. 13 - Prob. 13.10MECh. 13 - Using Financial Information to Identify Companies...Ch. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Prob. 13.4ECh. 13 - Prob. 13.5ECh. 13 - Prob. 13.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Inferring Financial Information from Ratios E13-11...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Computing Comparative Financial Statements and...Ch. 13 - Analyzing Financial Statements Using Ratios Use...Ch. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.1APCh. 13 - Prob. 13.2APCh. 13 - Calculating Profitability, Turnover, Liquidity,...Ch. 13 - Prob. 13.4APCh. 13 - Prob. 13.5APCh. 13 - Prob. 13.6APCh. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Comparing Companies within an Industry Refer to...Ch. 13 - Prob. 13.4CPCh. 13 - Inferring Information from the DuPont Model Ratios...Ch. 13 - Prob. 13.6CP
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