Reference no: EM131590838

Question - Denna Company's working capital accounts at the beginning of the year follow:

Cash$81,000    

Marketable securities$24,400    

Accounts receivable, net$376,400    

Inventory$488,600    

Prepaid expenses$15,700    

Accounts payable$219,800   

Notes due within one year$122,000    

Accrued liabilities$69,900  

During the year, Denna Company completed the following transactions:  

a. Paid a cash dividend previously declared, $41,000.a.Issued additional shares of common stock for cash, $222,000.

b. Sold inventory costing $78,800 for $111,000, on account.

c. Wrote off uncollectible accounts in the amount of $14,400, reducing the accounts receivable balance accordingly.

d. Declared a cash dividend, $41,000.

e. Paid accounts payable, $117,600.

f. Borrowed cash on a short-term note with the bank, $76,500.

g. Sold inventory costing $17,520 for $11,680 cash.

h. Purchased inventory on account, $58,250.

i. Paid off all short-term notes due, $198,500.

j. Purchased equipment for cash, $83,800.

k. Sold marketable securities costing $14,400 for cash, $12,000.

l. Collected cash on accounts receivable, $92,100.

Required:

1. Compute the following amounts and ratios as of the beginning of the year.

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.