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1. The Lux Company experiences the following unrelated events and transactions during Year 1. The company's existing current ratio is 2:1 and its quick ratio
1. The Lux Company experiences the following unrelated events and transactions during Year 1. The company's existing current ratio is 2:1 and its quick ratio is 1.2:1. 1. Lux wrote off $5,000 of accounts receivable as uncollectible. 2. A bank notifies Lux that a customer's check for $411 is returned marked insufficient funds. The customer is bankrupt. 3. The owners of Lux Company make additional cash investment of $7,500. 4. Inventory costing $600 is judged obsolete when a physical inventory is taken. 5. Lux declares a $5,000 cash dividend to be paid during the first week of the next reporting period. 6. Lux purchases long-term investments for $10,000. 7. Accounts payable of $9,000 are paid. 8. Lux borrows $1,200 from a bank and gives a 90-day 6% promissory note in exchange. 9. Lux sells a vacant lot for $20,000 that had been used in its operations. 10. A three-year insurance policy is purchased for $1,500. Required: Separately evaluate the immediate effect of each transaction on the company's: a. Current ratio
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