Denna Companys working capital accounts at the beginning of the year follow Cash $ 60,000 Marketable securities $ 28,600 Accounts receivable, net $ 326,000 Inventory $ 434,000 Prepaid expenses $ 6,000 Accounts payable $ 182,000 Notes due within one year $ 80,000 Accrued liabilities $ 51,000 During the year, Denna Company completed the following transactions x Paid a cash dividend previously declared, $20,000 a Issued additional shares of common stock for cash, $180,000 b Sold inventory costing $62,000 for $90,000, on account c Wrote off uncollectible accounts in the amount of $6,000, reducing the accounts receivable balance accordingly d Declared a cash dividend, $20,000 e Paid accounts payable, $84,000 f Borrowed cash on a short term note with the bank, $45,000 g Sold inventory costing $20,460 for $13,640 cash h Purchased inventory on account, $42,500 i Paid off all short term notes due, $125,000 j Purchased equipment for cash, $67,000 k Sold marketable securities costing $18,600 for cash, $15,500 l Collected cash on accounts receivable, $69,000 Required 1 Compute the following amounts and ratios as of the beginning of the year (Round your ratios to 2 decimal places ) 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 capital 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 due j Purchased equipment for cash k Sold marketable securities at a loss l Collected accounts receivable

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Posted on Aug 06, 2024

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

During the year, Denna Company completed the following transactions:

x.	Paid a cash dividend previously declared, $20,000.
a.	Issued additional shares of common stock for cash, $180,000.
b.	Sold inventory costing $62,000 for $90,000, on account.
c.	Wrote off uncollectible accounts in the amount of $6,000, reducing the accounts receivable balance accordingly.
d.	Declared a cash dividend, $20,000.
e.	Paid accounts payable, $84,000.
f.	Borrowed cash on a short-term note with the bank, $45,000.
g.	Sold inventory costing $20,460 for $13,640 cash.
h.	Purchased inventory on account, $42,500.
i.	Paid off all short-term notes due, $125,000.
j.	Purchased equipment for cash, $67,000.
k.	Sold marketable securities costing $18,600 for cash, $15,500.
l.	Collected cash on accounts receivable, $69,000.

Required:

1.	Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2 decimal places.)

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 capital 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 due
j.	Purchased equipment for cash
k.	Sold marketable securities at a loss
l.	Collected accounts receivable