Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 14-14 Effects of Transactions on Various Ratios (L014-2] Denna Company's working capital accounts at the beginning of the year follow: Cash Marketable securities Accounts

image text in transcribed
image text in transcribed
Problem 14-14 Effects of Transactions on Various Ratios (L014-2] Denna Company's working capital accounts at the beginning of the year follow: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Accounts payable Notes due within one year Accrued liabilities $ 83,000 $ 25,000 $ 381,200 $ 493,800 $ 17, 100 $ 223,400 $ 126,000 $ 71,700 erences During the year, Denna Company completed the following transactions; Ex. Pald a cosh dividend previously declared, $43,000. a. Issued additional shares of common stock for cash, $226,000. b. Sold inventory costing $80,400 for $113,000, on account. c. Wrote off uncollectible accounts in the amount of $15,200, reducing the accounts receivable balance accordingly. d. Declared a cash dividend, $43,000 e Paid accounts payable, $120,800 1. Borrowed cash on a short-term note with the bank. $79.500 M Check a. Issued additional shares of common stock for cash $226,000. b. Sold inventory costing $80,400 for $113,000, on account. c. Wrote off uncollectible accounts in the amount of $15,200, reducing the accounts receivable balance accordingly. d. Declared a cash dividend, $43,000 e. Paid accounts payable, $120,800. f. Borrowed cash on a short-term note with the bank, $79,500. g. Sold inventory costing $18,900 for $12,600 cash. h Purchased inventory on account, $59,750. 1. Paid off all short-term notes due, $ 205,500 J. Purchased equipment for cash. $85,400. k. Sold marketable securities costing $15,000 for cash, $12,500. 1. Collected cash on accounts receivable, $94,300. nes Required: 1. Compute the following amounts and ratios as of the beginning of the year 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 (EX) 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Peace Love Auditing Journal

Authors: Epic Love Books

1st Edition

1697161693, 978-1697161694

More Books

Students also viewed these Accounting questions

Question

Define a derivative instrument as per U.S. GAAP and as per IFRS.

Answered: 1 week ago