Data pertaining to the current position of Newton Industries, Inc., are as follows: Cash $300,000 Temporary investments

Question:

Data pertaining to the current position of Newton Industries, Inc., are as follows:

Cash $300,000

Temporary investments 250,000

Accounts and notes receivable (net) 350,000

Inventories 440,000

Prepaid expenses 60,000

Accounts payable 420,000

Notes payable (short-term) 460,000

Accrued expenses 120,000

Instructions

1. Compute

(a) The working capital,

(b) The current ratio, and

2. List the following captions on a sheet of paper:

Transaction Working Capital Current Ratio Quick Ratio

Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given above. Round to one decimal place.

a. Sold temporary investments at no gain or loss, $120,000.

b. Paid accounts payable, $200,000.

c. Purchased goods on account, $80,000.

d. Paid notes payable, $200,000.

e. Declared a cash dividend, $125,000.

f. Declared a common stock dividend on common stock, $100,000.

g. Borrowed cash from bank on a long-term note, $400,000.

h. Received cash on account, $65,000.

i. Issued additional shares of stock for cash, $800,000.

j. Paid cash for prepaid expenses, $20,000.

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