Problem 13-14A Effects of Transactions on Various Ratios [LO13-2]

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

Cash	$	71,000
Marketable securities	$	22,000
Accounts receivable, net	$	352,400
Inventory	$	462,600
Prepaid expenses	$	8,700
Accounts payable	$	201,800
Notes due within one year	$	102,000
Accrued liabilities	$	60,900

During the year, Denna Company completed the following transactions:

x.	Paid a cash dividend previously declared, $31,000.
a.	Issued additional shares of common stock for cash, $202,000.
b.	Sold inventory costing $70,800 for $101,000, on account.
c.	Wrote off uncollectible accounts in the amount of $10,400, reducing the accounts receivable balance accordingly.
d.	Declared a cash dividend, $31,000.
e.	Paid accounts payable, $101,600.
f.	Borrowed cash on a short-term note with the bank, $61,500.
g.	Sold inventory costing $15,420 for $10,280 cash.
h.	Purchased inventory on account, $50,750.
i.	Paid off all short-term notes due, $163,500.
j.	Purchased equipment for cash, $75,800.
k.	Sold marketable securities costing $12,000 for cash, $10,000.
l.	Collected cash on accounts receivable, $81,100.

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.