Riley Manufacturing has a current ratio of 3:1 on December 31, 2018. Indicate wh

Question

Riley Manufacturing has a current ratio of 3:1 on December 31, 2018. Indicate whether each of the following transactions would increase (+), decrease (), or have no effect (NA) on Riley’s current ratio and its working capital. (Indicate the effect of each transactions by selecting "+" for increase, "–" for decrease, and "NA" for no effect.)

a. paid cash for a trademark

b. wrote off an uncollectible account receivable

c. sold equipment for cash

d. sold merchandise at a profit (cash)

e. declared a cash dividend

f. purchased inventory on account

g. scarpped a fully depreciated machine (no gain or loss)

h. issued a stock dividend

i. purchased a machine with a long-term note

j. paid previously declared cash dividend

k. collected accounts receivable

Explanation / Answer

I.

Current Ratio Working Capital a. NA NA b. (-) (+) c. NA NA d. NA NA e. NA NA f. NA NA g. NA NA h. NA NA

I.

(-) (+) j. NA NA k. NA NA

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