In: Accounting
Denna Company’s working capital accounts at the beginning of the year follow:
Cash | $ | 61,000 |
Marketable securities | $ | 28,300 |
Accounts receivable, net | $ | 328,400 |
Inventory | $ | 436,600 |
Prepaid expenses | $ | 6,200 |
Accounts payable | $ | 183,800 |
Notes due within one year | $ | 82,000 |
Accrued liabilities | $ | 51,900 |
During the year, Denna Company completed the following transactions:
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 (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.
|