Reference no: EM131116615
Effect of transactions on current position analysis
Data pertaining to the current position of Forte Company are as follows:
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Cash
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$412,500
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Marketable securities
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187,500
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Accounts and notes receivable (net)
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300,000
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Inventories
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700,000
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Prepaid expenses
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50,000
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Accounts payable
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200,000
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Notes payable (short-term)
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250,000
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Accrued expenses
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300,000
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Instructions
1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round to one decimal place.
2. List the following captions on a sheet of paper:
Transaction Working Capital Current Ratio Quick Ratio
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.
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