b. Merchandise is sold for cash. (Assume a profit.) c. A fixed asset is sold for
ID: 2513531 • Letter: B
Question
b. Merchandise is sold for cash. (Assume a profit.) c. A fixed asset is sold for more than book value. d. Payment is made to trade creditors for previous e. A cash dividend is declared and paid. f. A stock dividend is declared and paid. g Cash is h. A profitable firm increases its fixed assets long-term bank loans. tion allowance account. j. Ten-year notes are issued to pay off accounts receivable are collected. is purchased with sh The estimated taxes payable are increased. payable. n. o. Marketable securities are sold below cost. Required Indicate the effects of the previous transactions on each of the following: total cur- rent assets, total current liabilities, net working capital, and current ratio. Use + to indicate an increase, - to indicate a decrease, and 0 to indicate no effect. Assume an initial current ratio of more than 1 to 1.Explanation / Answer
current assets
current liabilities
net working capital
current ratio
A-
+
0
+
+
B-
+
0
+
+
C-
+
0
+
+
D-
-
-
0
0
E-
-
-
0
0
F-
0
0
0
0
G-
+
0
+
+
H-
0
0
0
0
I-
-
0
-
-
J
0
-
+
+
K-
0
0
0
0
L-
0
+
-
-
M-
+
+
0
0
N-
0
+
-
-
O-
-
0
-
-
current assets
current liabilities
net working capital
current ratio
A-
+
0
+
+
B-
+
0
+
+
C-
+
0
+
+
D-
-
-
0
0
E-
-
-
0
0
F-
0
0
0
0
G-
+
0
+
+
H-
0
0
0
0
I-
-
0
-
-
J
0
-
+
+
K-
0
0
0
0
L-
0
+
-
-
M-
+
+
0
0
N-
0
+
-
-
O-
-
0
-
-
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