value 10.00 points Denna Company\'s working capital accounts at the beginning of
ID: 2492237 • Letter: V
Question
value 10.00 points Denna Company's working capital accounts at the beginning of the year follow S 69,000 s 25,900 347,600 $457,400 $ 7,800 198,200 S 98,000 $59,100 Cash Marketable securities Accounts receivable, net Prepaid expenses Accounts payable Notes due within one year Accrued liabilities During the year, Denna Company completed the following transactions: x. Paid a cash dividend previously declared, $29,000. a. Issued additional shares of common stock for cash, $198,000. b. Sold inventory costing $69,200 for $99,000, on account c. Wrote off uncollectible accounts in the amount of $9,600, reducing the accounts receivable balance d. Declared a cash dividend, $29,000. e. Paid accounts payable, $98,400. f. Borrowed cash on a short-term note with the bank, $58,500. g. Sold inventory costing $18,570 for $12,380 cash. h. Purchased inventory on account, $49,250. i. Paid off all short-tem notes due, $156,500. Purchased equipment for cash, $74,200. k. Sold marketable securities costing $15,900 for cash, $13,250. L Collected cash on accounts receivable, $78,900. Required: 1. Compute the following amounts and ratios as of the beginning of the year: (Round your ratios to 2 decimal places.) a. Working capital b.Cument ratio G. Acid-tost ratio 2· indicate the effect of each of the transact ons 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. Ratio Acid-Test Ra Paid a cash dividend previously declared None a Issued capital stock for cash b. Sold inventory at a gain IncreaseExplanation / Answer
1.a.
Working capital = Current assets – Current liabilities
= (Cash + Marketable securities + Accounts receivable + Inventory + Prepaid expenses) – (Accounts payable + Notes + Accrued liabilities)
= (69,000 + 25,900 + 347,600 + 457,400 + 7,800) – (198,200 + 98,000 + 59,100)
= 907,700 – 355,300
= $552,400
1.b.
Current ratio = (Current assets) / (Current liabilities)
= 907,700 / 355,300
= 2.55
1.c.
Acid-test ratio = (Current assets – Inventory - Prepaid expenses) / Current liabilities
= (907,700 – 457,400 - 7,800) / 355,300
= 442,500 / 355,300
= 1.25
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.