Denna Company’s working capital accounts at the beginning of the year follow:

During the year, Denna Company completed the following transactions:

x.         Paid a cash dividend previously declared, $12,000.

(a) Issued additional shares of common stock for cash, $100,000.

(b) Sold inventory costing $50,000 for $80,000, on account.

(c) Wrote off uncollectible accounts in the amount of $10,000, reducing the accounts receivable balance accordingly.

(d) Declared a cash dividend, $15,000.

(e) Paid accounts payable, $50,000.

(f) Borrowed cash on a short-term note with the bank, $35,000.

(g) Sold inventory costing $15,000 for $10,000 cash.

(h) Purchased inventory on account, $60,000.

(i) Paid off all short-term notes due, $30,000.

(j) Purchased equipment for cash, $15,000.

(k) Sold marketable securities costing $18,000 for cash, $15,000.

(l) Collected cash on accounts receivable, $80,000.

Required:

1. Compute the following amounts and ratios as of the beginning of the year:

(a) Working capital.

(b) Current ratio.

(c) Acid-test ratio.

2. Indicate the effect of each of the transactions given above on working capital, the current ratio, and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item (x) is given below as an example of the format to use:

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Cash $50000 Marketable Securities $30,000 Accounts Receivable, net S200,000 $210,000 Inventory Prepaid Expenses S10,000 Accounts Payable $150,000 Notes Due Within One Year S30,000 Accrued Liabilities S20,000