Denna Companys working capital accounts at the beginning of the year follow Cash $ 73,000 Marketable securities $ 22,000 Accounts receivable, net $ 357,200 Inventory $ 467,800 Prepaid expenses $ 10,100 Accounts payable $ 205,400 Notes due within one year $ 106,000 Accrued liabilities $ 62,700 During the year, Denna Company completed the following transactions Paid a cash dividend previously declared, $33,000 Issued additional shares of common stock for cash, $206,000 Sold inventory costing $72,400 for $103,000, on account Wrote off uncollectible accounts in the amount of $11,200, reducing the accounts receivable balance accordingly Declared a cash dividend, $33,000 Paid accounts payable, $104,800 Borrowed cash on a short term note with the bank, $64,500 Sold inventory costing $15,900 for $10,600 cash Purchased inventory on account, $52,250 Paid off all short term notes due, $170,500 Purchased equipment for cash, $77,400 Sold marketable securities costing $12,000 for cash, $10,000 Collected cash on accounts receivable, $83,300 Required 1 Compute the following amounts and ratios as of the beginning of the year a Working capital b Current ratio c Acid test ratio 2 Indicate the effect of each of the transactions given above on working capital, the current ratio, and the acid test ratio Give the effect in terms of increase, decrease, or none Item (x) is given as an example Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period The Effect on Transaction Working Capital Current Ratio Acid Test Ratio x Paid a cash dividend previously declared None Increase Increase a Issued additional shares of common stock for cash b Sold inventory at a gain c Wrote off uncollectible accounts d Declared a cash dividend e Paid accounts payable f Borrowed on a short term note g Sold inventory at a loss h Purchased inventory on account i Paid short term notes j Purchased equipment for cash k Sold marketable securities at a loss l Collected accounts receivable

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Denna Companys working capital accounts at the beginning of the year follow: Cash $ 73,000 Marketable securities $ 22,000 Accounts receivable, net $ 357,200 Inventory

Denna Companys working capital accounts at the beginning of the year follow:


Cash	$	73,000
Marketable securities	$	22,000
Accounts receivable, net	$	357,200
Inventory	$	467,800
Prepaid expenses	$	10,100
Accounts payable	$	205,400
Notes due within one year	$	106,000
Accrued liabilities	$	62,700

During the year, Denna Company completed the following transactions:

Paid a cash dividend previously declared, $33,000.
Issued additional shares of common stock for cash, $206,000.
Sold inventory costing $72,400 for $103,000, on account.
Wrote off uncollectible accounts in the amount of $11,200, reducing the accounts receivable balance accordingly.
Declared a cash dividend, $33,000.
Paid accounts payable, $104,800.
Borrowed cash on a short-term note with the bank, $64,500.
Sold inventory costing $15,900 for $10,600 cash.
Purchased inventory on account, $52,250.
Paid off all short-term notes due, $170,500.
Purchased equipment for cash, $77,400.
Sold marketable securities costing $12,000 for cash, $10,000.
Collected cash on accounts receivable, $83,300.

Required:

1. Compute the following amounts and ratios as of the beginning of the year:

a. Working capital.

b. Current ratio.

c. Acid-test ratio.

2. Indicate the effect of each of the transactions given above on working capital, the current ratio, and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item (x) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period.

			The Effect on
	Transaction	Working Capital	Current Ratio	Acid-Test Ratio
x.	Paid a cash dividend previously declared	None	Increase	Increase
a.	Issued additional shares of common stock for cash
b.	Sold inventory at a gain
c.	Wrote off uncollectible accounts
d.	Declared a cash dividend
e.	Paid accounts payable
f.	Borrowed on a short-term note
g.	Sold inventory at a loss
h.	Purchased inventory on account
i.	Paid short-term notes
j.	Purchased equipment for cash
k.	Sold marketable securities at a loss
l.	Collected accounts receivable