Data pertaining to the current position of Forte Company are as follows: Cash $4

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. ____ _____ ______

Explanation / Answer

A) WORKING CAPITAL 440000+175000+335000+44000-180000-230000-290000 364000 B) CURRENT RATIO 2.42 C) QUICK RATIO0 1.357143 NEW ASSETS AND LIABILITIES MARKETEABLE SECURITIES SOLD 80000 95000 ACCOUNTS PAYABLE PAID120000 60000 INVENTORIES PURCHASED GOODS130000 830000 ACCOUNT PAYABLE INCREASED BY 130000 190000 A/C PAYABLE PAID105000 85000 CASH DECLARED CASH DIVIDEND 140000 300000 CASH BORROWED CASH 200000 500000 CASH RECEIVED 140000 640000 CASH ISSUED SHARES 595000 1235000 CASH PAID CASH 12000 1223000 NEW RATIOS WORKING CAPITAL 1827000 CURRENT RATIO 3.13913 QUICK RATIO 2.67438

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