Data pertaining to the current position of Forte Company are as follows:

Cash

$440,000

Marketable securities

175,000

Accounts and notes receivable (net)

335,000

Inventories

700,000

Prepaid expenses

44,000

Accounts payable

180,000

Notes payable (short-term)

230,000

Accrued expenses

290,000

Required:

1.

Compute (A) the working capital

The excess of the current assets of a business over its current liabilities.

, (B) the current ratio

A financial ratio that is computed by dividing current assets by current liabilities.

, and (C) the quick ratio

A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).

. Round ratios to one decimal place.

2.

Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round to one decimal place.

A.	Sold marketable securities at no gain or loss, 80,000.
B.	Paid accounts payable, 120,000.
C.	Purchased goods on account, 130,000.
D.	Paid notes payable, 105,000.
E.	Declared a cash dividend, 140,000.
F.	Declared a common stock dividend on common stock, 50,000.
G.	Borrowed cash from bank on a long-term note, 200,000.
H.	Received cash on account, 140,000.
I.	Issued additional shares of stock for cash, 595,000.
J.	Paid cash for prepaid expenses, 12,000.

X

Starting Questions

Shaded cells have feedback.

1.

Compute the following. Round ratios to one decimal place

A.	Working capital:
B.	Current ratio:
C.	Quick ratio:

Points:

3 / 3

1.

Compute the following. Round ratios to one decimal place

A.	For working capital, subtract current liabilities from current assets.
B.	For the current ratio, divide current assets by current liabilities.
C.	For the quick ratio, divide quick assets by current liabilities. Quick assets are cash, temporary investments, and receivables.

Explanation

none

X

Final Questions

Shaded cells have feedback.

2. Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round to one decimal place.

	Working	Current	Quick
Transaction	Capital	Ratio	Ratio
A.	_____	____	____
B.	____	_____	____
C.	____	____	_____
D.	_____	____	____
E.	____	____	_____
F.	_____	_____	_____
G.	_____	_____	____
H.	_____	_____	_____
I.	_____	______	_______
J.	____	_____	______