Problem 1. The following data are takenfrom the balance sheet at the end of the

Question

Problem 1.
The following data are takenfrom the balance sheet at the end of the current year
1 identify (a) current assets. (b) quick assest. (c) current libilities.

cash----------------------------3000
prepaid expenses 1200
accululated depreciation 2000
Accounts Recievable 4000
Retained Earnings 8000
Marketable Securites 1500
Accrued Liabilities 1100
Dividends Payable 1800
Equipment 10000

Notes payable short term 1200
accounts paybale 1600
allowance for doubtful account 1400
income tax payable 1300
mortgage note payable 20,000
office supplies 1700
common stock 10,000
paid in capitial in excess of par 11,000
treasury stock 2500

The following dats are 1 identify (ajcurrent Cash Prepaid Expenses Accounts Receivable Retained Earnings Marketable Securities1,00 1,100 Accrued iabilities Office sueeflies 1700 1,100 Paid in Capital in excess of Par 11000 Treasury Stock 10,000 ,500 Compute the following Account Amount Account Amount Account Amount Total Total Total 2. Compute the working capital, current ratio, and the quick ratio based on the information above and record the results in the appropriate columns. Round to the nearest one decimal point. 3. Consider each transaction separately, and assume that only that transaction affects the data given above a. Declared a stock dividend $1,000 b. Paid Mortgage note payable $1,500 c. Sold treasury stock for cash 1,200 d. Received cash from customers on account, 2,000 current ratio quick ratio Record the answer in the appropriate columns. working capital current liabilities quick assets Current assets 2. 3a. 3b. 3c.

Explanation / Answer

Problem 1:

(a). Current Assets;

Current Assets = 9700

Explanation;

Following are the current assets;

Cash

3000

Prepaid expenses

1200

Accounts receivable

4000

Marketable securities

1500

Total Current Assets

9700

(b). Quick Assets;

Quick Assets = 8500

Explanation;

Following are the quick assets;

Cash

3000

Accounts receivable

4000

Marketable securities

1500

Total Quick Assets

8500

(c). Current Liabilities;

Current Liabilities = 7000

Explanation;

Following are the current liabilities;

Accrued liabilities

1100

Dividend payable

1800

Note payable short term

1200

Accounts payable

1600

Income tax payable

1300

Total current liabilities

7000

Problem 2.

Working capital;

Formula of working capital = Current assets – Current liabilities

Working capital (9700 – 7000) = 2700

Current Ratio;

Formula of Current Ratio = Current assets / Current liabilities

Current Ratio = 9700 / 7000 = 1.38 : 1

Quick Ratio;

Formula of Quick Ratio = Quick assets / Current liabilities

Current Ratio = 8500 / 7000 = 1.21 : 1

Problem 3.

(a). Declared a stock dividend $1000;

Declaration of stock dividend will not affect anything in given question.

(b). Paid mortage note payable $1500;

Following impact will be on each items;

Current assets;

Current assets ($9700 – $1500) = $8200

Quick assets;

Current assets ($8500 – $1500) = $7000

Working capital;

Formula of working capital = Current assets – Current liabilities

Working capital (8200 – 7000) = 1200

Current Ratio;

Formula of Current Ratio = Current assets / Current liabilities

Current Ratio = 8200 / 7000 = 1.17 : 1

Quick Ratio;

Formula of Quick Ratio = Quick assets / Current liabilities

Current Ratio = 7000 / 7000 = 1 : 1

(c). Sold treasury stock for cash $1200;

Following impact will be on each items;

Current assets;

Current assets ($9700 + $1200) = $10900

Quick assets;

Current assets ($8500 + $1200) = $9700

Working capital;

Formula of working capital = Current assets – Current liabilities

Working capital ($10900 – 7000) = 3900

Current Ratio;

Formula of Current Ratio = Current assets / Current liabilities

Current Ratio = 10900 / 7000 = 1.56 : 1

Quick Ratio;

Formula of Quick Ratio = Quick assets / Current liabilities

Current Ratio = 9700 / 7000 = 1.38 : 1

(d). Received cash from customers on account $2000;

There will be no impact on all the given ratios and items because it will affect only items of current assets only.

Cash

3000

Prepaid expenses

1200

Accounts receivable

4000

Marketable securities

1500

Total Current Assets

9700

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