Question

Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows:

Cash	$	44,800
Marketable securities		126,000
Accounts receivable, net		154,000
Inventory		175,000
Prepaid expenses		19,600
Total current assets	$	519,400
Accounts payable	$	99,000
Other accrued liabilities		24,200
Short-term debt		44,000
Total current liabilities	$	167,200

a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2016. (Round "Ratio" answers to 2 decimal places.)

b. Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2017.

1. Credit sales for the year amounted to $336,000. The cost of goods sold was $218,400.
2. Collected accounts receivable, $352,800.
3. Purchased inventory on account, $235,200.
4. Issued 700 shares of common stock for $25 per share.
5. Wrote off $9,800 of uncollectible accounts using the allowance for bad debts.
6. Declared and paid a cash dividend, $28,000.
7. Sold marketable securities costing $36,400 for $43,400 in cash.
8. Recorded insurance expense for the year, $16,800. The premium for the policy was paid in June 2016.
9. Borrowed cash on a short-term bank loan, $14,000.
10. Repaid principal of $56,000 and interest of $4,200 on a long-term bank loan.

b-1. Prepare journal entries for the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

b-2. Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, – for decrease, and (NE) for no effect.

Answer 1