The REX Company experiences the following unrelated events and transactions during Year 1. 

The company’s existing current ratio is 2:1 and its quick ratio is 1.2:1. 

1. REX wrote off $5,000 of accounts receivable as uncollectible. (Assumes a sufficient amount is provided for in the Allowance for Bad Debts.) 

2. A bank notifies REX that a customer’s check for $411 is returned marked insufficient funds. The customer is bankrupt. 

3. The owners of REX Company make an additional cash investment of $7,500. 

4. Inventory costing $600 is judged obsolete when a physical inventory is taken. 

5. REX declares a $5,000 cash dividend to be paid during the first week of the next reporting period. 

6. REX purchases long-term investments for $10,000. 

7. Accounts payable of $9,000 are paid. 

8. REX borrows $1,200 from a bank and gives a 90-day, 6% promissory note in exchange. 

9. REX sells a vacant lot for $20,000 that had been used in its operations. 

10. A three-year insurance policy is purchased for $1,500. 

Required: 

Separately evaluate the immediate effect of each transaction on the company’s: 

a. Current ratio 

b. Quick (acid-test) ratio 

c. Working capital