Denna Company’s working capital accounts at the beginning of the year follow: a.

Question

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

   

   

   

a. Working capital

b. Current ratio

c. Acid-test ratio

        

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.

  Cash $ 63,000       Marketable securities $ 27,700       Accounts receivable, net $ 333,200       Inventory $ 441,800       Prepaid expenses $ 6,600       Accounts payable $ 187,400   Notes due within one year $ 86,000       Accrued liabilities $ 53,700

Explanation / Answer

Working Capital Current assets- Current Liabilities Current assets Cash 63000 Marketable Securities 27700 Accounts Receivable 333200 Inventory 441800 Prepaid Expenses 6600 Current assets 872300 Current Liabilities Accounts Payable 187400 Notes due within one year 86000 Accrues Liabilities 53700 Current Liabilities 327100 Working Capital 872300-327100 Working Capital 545200 Current Ratio = Current Assets/ Current Liabilities 872300/327100 2.67 Acid Test Ratio Current Assets- Inventories- Prepaid Expenses/ Current Liablities 872300-441800-6600/327100 1.3

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.