Question
Effect on transactions on liquidity measures Selected balance sheet accounts for Tibbets Company on September 30, 2019, are as follows: Cash $48,000.00 Marketable securities 87,000
Effect on transactions on liquidity measures
Selected balance sheet accounts for Tibbets Company on September 30, 2019, are as follows:
Cash $48,000.00
Marketable securities 87,000
Accounts receivable, net 129,000
Inventory 135,000
Prepaid expenses 21,000
total current assets $420,000.00
Accounts Payable $147,000.00
Other accrued liabilities 33,000
Short-term debt 60,000
total current liabilities $240,000.00
Required:
a. Calculate the working capital, current ration, and acid-test ratio for Tibbetts Company as of Sep 30,2019
b. Summarized here are the transactions/events that took place during the fiscal year ended Sep 30,2020. Indicate the effect of each item on Tibbets Co's working capital, current ratio, and acid-test ratio. Use + for increase , - for decrease, and (NE) for no effect. [Hint: It may be helpful to use the horizontal model or to record the journal entry(ies) for each item before considering the effects on liquidity measures.]
Transaction/Event Working Current Capital Ratio Acid- Test Ratio 0. Example: Paid accounts payable, $585,000. NE + + 1. Credit sales for the year amounted to $360,000. The cost of goods sold was $234,000. 2. Collected accounts receivable, $378,000. 3. Purchased inventory on account, $252,000. 4. Issued 250 shares of common stock for $54 per share. 5. Wrote off $10,500 of uncollectible accounts using the allowance for bad debts. 6. Declared and paid a cash dividend, $30,000. 7. Sold marketable securities costing $39,000 for $46,500 in cash. 8. Recorded insurance expense for the year, $18,000. The premium for the policy was paid in June 2019. 9. Borrowed cash on a short-term bank loan, $15,000. 10. Repaid principal of $60,000 and interest of $4,500 on a long-term bank loanStep by Step Solution
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