Firpo Incorporated had the following transactions involving current assets andcurrent liabilities during February 1998:

Additional information:1. As of February 1, 1998, current assets were \(\$ 140,000\) and current liabilities were\(\$ 50,000\).2. As of February 1, 1998, current assets included \(\$ 15,000\) of inventory and \(\$ 5,000\) ofprepaid expenses.

Instructions

(a) Compute the current ratio as of the beginning of the month and after each trans-action.

(b) Compute the acid-test ratio as of the beginning of the month and after each trans-action.

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Feb. 3 Collected accounts receivable of $15,000. 7 Purchased equipment for $25,000 cash. 11 Paid $3,000 for a 3-year insurance policy. 14 Paid accounts payable of $14,000. 18 Declared cash dividends, $6,000.