Indicate the effects of the transactions listed in the following table on total current assets, current ratio, and net income. Use (+) to indicate an increase, (–) to indicate a decrease, and

(0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer the questions you can.)

Total Current Assets Current Ratio Effect on Net Income

a. Cash is acquired through issuance of additional common stock. _____ _____ _____

b. Merchandise is sold for cash. _____ _____ _____

c. Federal income tax due for the previous year is paid. _____ _____ _____

d. A fixed asset is sold for less than book value. _____ _____ _____

e. A fixed asset is sold for more than book value. _____ _____ _____

f. Merchandise is sold on credit. _____ _____ _____ g. Payment is made to trade creditors for previous purchases. _____ _____ _____ h. A cash dividend is declared and paid. _____ _____ _____ i. Cash is obtained through short-term bank loans. _____ _____ _____ j. Short-term notes receivable are sold at a discount. _____ _____ _____ k. Marketable securities are sold below cost. _____ _____ _____ l. Advances are made to employees. _____ _____ _____ m. Current operating expenses are paid. _____ _____ _____ n. Short-term promissory notes are issued to trade creditors in exchange for past due accounts payable. _____ _____ _____ o. 10-year notes are issued to pay off accounts payable. _____ _____ _____ p. A fully depreciated asset is retired. _____ _____ _____ q. Accounts receivable are collected. _____ _____ _____ r. Equipment is purchased with short-term notes. _____ _____ _____ s. Merchandise is purchased on credit. _____ _____ _____ t. The estimated taxes payable are increased. _____ _____ _____ PROBLEMS AppendixLO1