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Ex. 12-1. Effects of transactions on ratios. Indicate the effects of each of the independent transactions or events on (a) current ratio, and (b) acid
Ex. 12-1. Effects of transactions on ratios. Indicate the effects of each of the independent transactions or events on (a) current ratio, and (b) acid test ratio. Assume that both ratios are greater than 1:1 prior to the transactions/events. The possible answers are increase, decrease and no effect. 1. Obtain a long-term loan 2. Buy inventory on credit 3. Pay a trade account payable 4. 5. 6. 7. 8. 9. Borrow cash on short-term loan Collect cash from customers on account Sell a piece of land (fixed asset) for cash at a loss Buy a machine for cash Dispose for cash marketable securities held as temporary investment Declare and pay cash dividend 10. Record accrued expenses payable
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