Effect of various transactions on financial statement ratios. Indicate the effects (increase, decrease, no effect) of the following independent transactions on ( 1 ) earnings per share. (2)

working capital, and (3) the quick ratio, where accounts receivable are included but merchandise inventory is excluded from quick assets. State any necessan, assumptions.

a. A firm sells for $300,000. on account, merchandise inventory costing $240,000.

b. A firm declares dividends of $160,000. It will pay the dividends during the next accounting period.

c. A firm purchases, on account, merchandise inventory costing $410,000.

d. A firm sells for $20,000 a machine costing $80,000 and with accumulated depreciation of $60,000.

e. Because of defects, a firm returns to the supplier merchandise inventory purchased for

$7,000 cash. The firm receives a cash reimbursement.

f. A firm issues 10.000 shares of $10 par value common stock on the last day of the accounting period for $15 per share. It uses the proceeds to acquire the assets of another firm composed of the following: accounts receivable, $30,000; merchandise inventory.

$60,000; plant and equipment. $100,000. The acquiring firm also agrees to pay current liabilities of $40,000 of the acquired company.

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