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Financial Accounting
Effect of transactions on current position analysis
Data pertaining to the current position of Forte Company follow:
Instructions
1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round ratios in parts b through j to one decimal place.
2. List the following captions on a sheet of paper:
Compute the working capital, the current ratio, and the quick ratio after each of the following transactions and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given. Round to one decimal place.
- a. Sold marketable securities at no gain or loss, $70,000.
- b. Paid accounts payable, $125,000.
- c. Purchased goods on account, $110,000.
- d. Paid notes payable, $100,000.
- e. Declared a cash dividend, $150,000.
- f. Declared a common stock dividend on common stock, $50,000.
- g. Borrowed cash from bank on a long-term note, $225,000.
- h. Received cash on account, $125,000.
- i. Issued additional shares of stock for cash, $600,000.
- j. Paid cash for prepaid expenses, $10,000.
1) (a)
Compute working capital.
Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.
Compute working capital.
b)
Compute Current ratio.
c)
Calculate Acid-test ratio.
2.
Compute Working capital, Current ratio, and Quick ratio considering the given transactions.
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