Effect of Transactions on Working Capital, Current Ratio, and Quick Ratio
The following account balances are taken from the records of Pijet Enterprieses:
| Cash | $70,000 |
| Short-term investments | 58,000 |
| Accounts receivable | 78,000 |
| Inventory | 100,000 |
| Prepaid insurance | 10,000 |
| Accounts payable | 75,000 |
| Taxes payable | 25,000 |
| Salaries and wages payable | 40,000 |
| Short-term loans payable | 60,000 |
Required:
1. Use the information provided to compute the amount of working capital and Pijet's current and quick ratios (round to three decimal points).
| Working capital | $fill in the blank 1 | |
| Current ratio | fill in the blank 2 | to 1 |
| Quick ratio | fill in the blank 3 | to 1 |
2. Determine the effect that each of the following transactions will have on Pijet's working capital, current ratio, and quick ratio by recalculating each and then indicating whether the measure is increased, decreased, or not affected by the transaction. Consider each transaction independently; that is, assume that it is the only transaction that takes place.
Enter all amounts as positive numbers. For the ratios, round to three decimal places.
| Transaction | Working Capital | Effect on Working Capital | Current Ratio | Effect on Current Ratio | Quick Ratio | Effect on Quick Ratio |
| a. Purchased inventory on account, $14,000 |
b. Purchased inventory for cash, $16,000 | c. Paid suppliers on account, $30,000 | |
| d. Received cash on account, $40,000 |
| e. Paid insurance for next year, $20,000 |
| f. Made sales on account, $46,000 |
| g. Repaid short-term loans at bank, $25,000 |
| h. Borrowed $40,000 at bank for 90 days |
| i. Declared and paid $45,000 cash dividend |
| j. Purchased $20,000 of short-term investments |
| k. Paid $30,000 in salaries |
| l. Accrued additional $15,000 in taxes |
