Problem 15-14 Effects of Transactions on Various Ratios [LO15-2]

Denna Company's working capital accounts at the beginning of the year follow:

Cash$62,000

Marketable securities$28,000

Accounts receivable, net$330,800

Inventory$439,200

Prepaid expenses$6,400

Accounts payable$185,600

Notes due within one year$84,000

Accrued liabilities$52,800

During the year, Denna Company completed the following transactions:

1. Paid a cash dividend previously declared, $22,000.
2. Issued additional shares of common stock for cash, $184,000.
3. Sold inventory costing $63,600 for $92,000, on account.
4. Wrote off uncollectible accounts in the amount of $6,800, reducing the accounts receivable balance accordingly.
5. Declared a cash dividend, $22,000.
6. Paid accounts payable, $87,200.
7. Borrowed cash on a short-term note with the bank, $48,000.
8. Sold inventory costing $21,900 for $14,600 cash.
9. Purchased inventory on account, $44,000.
10. Paid off all short-term notes due, $132,000.
11. Purchased equipment for cash, $68,600.
12. Sold marketable securities costing $18,000 for cash, $15,000.
13. Collected cash on accounts receivable, $71,200.

1. 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.

Indicate the effect of each of the transactions given above on working capital, the coment ratio, and the acidtest 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. Paid a cash dividend previously.r declared Issued additional shares of common stock for cash F) . Sold inventory at a gain Wrote o uncollectible accounts Declared a cash dividend Irv l-n Paid accourlts payable Borrowed on a shortterm note .45\" Sold inventory at a loss Purchased inventory on account Paid shortterm notes Purchased equipment tor cash . Sold marketable securities at a loss Collected accounts receivable we Ieeeee