Data pertaining to the current position of Forte Company are as follows: Cash $4
ID: 2471800 • Letter: D
Question
Data pertaining to the current position of Forte Company are as follows:
Cash
$440,000
Marketable securities
175,000
Accounts and notes receivable (net)
335,000
Inventories
700,000
Prepaid expenses
44,000
Accounts payable
180,000
Notes payable (short-term)
230,000
Accrued expenses
290,000
Required:
1.
Compute (A) the working capital
The excess of the current assets of a business over its current liabilities.
, (B) the current ratio
A financial ratio that is computed by dividing current assets by current liabilities.
, and (C) the quick ratio
A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).
. Round ratios to one decimal place.
2.
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 of the table provided. 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, 80,000.
B.
Paid accounts payable, 120,000.
C.
Purchased goods on account, 130,000.
D.
Paid notes payable, 105,000.
E.
Declared a cash dividend, 140,000.
F.
Declared a common stock dividend on common stock, 50,000.
G.
Borrowed cash from bank on a long-term note, 200,000.
H.
Received cash on account, 140,000.
I.
Issued additional shares of stock for cash, 595,000.
J.
Paid cash for prepaid expenses, 12,000.
X
Starting Questions
Shaded cells have feedback.
1.
Compute the following. Round ratios to one decimal place
A.
Working capital:
B.
Current ratio:
C.
Quick ratio:
Points:
3 / 3
1.
Compute the following. Round ratios to one decimal place
A.
For working capital, subtract current liabilities from current assets.
B.
For the current ratio, divide current assets by current liabilities.
C.
For the quick ratio, divide quick assets by current liabilities. Quick assets are cash, temporary investments, and receivables.
Explanation
none
X
Final Questions
Shaded cells have feedback.
2. 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 of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round to one decimal place.
Working
Current
Quick
Transaction
Capital
Ratio
Ratio
A.
_____
____
____
B.
____
_____
____
C.
____
____
_____
D.
_____
____
____
E.
____
____
_____
F.
_____
_____
_____
G.
_____
_____
____
H.
_____
_____
_____
I.
_____
______
_______
J.
____
_____
______
Cash
$440,000
Marketable securities
175,000
Accounts and notes receivable (net)
335,000
Inventories
700,000
Prepaid expenses
44,000
Accounts payable
180,000
Notes payable (short-term)
230,000
Accrued expenses
290,000
Required:
1.
Compute (A) the working capital
The excess of the current assets of a business over its current liabilities.
, (B) the current ratio
A financial ratio that is computed by dividing current assets by current liabilities.
, and (C) the quick ratio
A financial ratio that measures the ability to pay current liabilities with quick assets (cash, marketable securities, accounts receivable).
. Round ratios to one decimal place.
2.
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 of the table provided. 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, 80,000.
B.
Paid accounts payable, 120,000.
C.
Purchased goods on account, 130,000.
D.
Paid notes payable, 105,000.
E.
Declared a cash dividend, 140,000.
F.
Declared a common stock dividend on common stock, 50,000.
G.
Borrowed cash from bank on a long-term note, 200,000.
H.
Received cash on account, 140,000.
I.
Issued additional shares of stock for cash, 595,000.
J.
Paid cash for prepaid expenses, 12,000.
Explanation / Answer
Solution:
Total current assets Cash 175,000 Marketable securities 335,000 Accounts and notes receivable 700,000 Inventories 700,000 Prepaid expense 44,000 Total current assets 1,954,000 Total current liabilities Accounts payable 180,000 Notes payable 230,000 Accured expense 290,000 Total current liabilities 700,000 1 Working capital = Total current assets - Total current liabilities Total current assets 1,954,000 Total current liabilities 700,000 Working capital 1,254,000 2 Current ratio = Total current assets / Total current liabilities Current ratio = 2.79 Total current assets 1,954,000 Total current liabilities 700,000 3 Quick ratio = Total current assets - Inventory - Prepaid expense / Total current liabilities Total current assets 1954000 Inventories 700000 Prepaid expense 44,000 Quick assets 1,210,000 Total current liabilities 700,000 Quick ratio 1.73Related Questions
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