Indicate the effects of the transactions listed in the following table on total
ID: 2741122 • Letter: I
Question
Indicate the effects of the transactions listed in the following table on total current assets, current ratios, and net income. Use (+) to indicate an increases, (-) to indicate decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer some of these questions; if yours is not strong, answer just the questions you can.)
Total Current Assets
Current Ratio
Effect on Net Income
Cash is acquired through issuance of additional common stock
____
____
____
Merchandise is sold for cash
____
____
____
Federal income tax due for the previous year is paid
____
____
____
A fixed asset is sold for less than book value
____
____
____
A fixed asset is sold for more than book value
____
____
____
Merchandise is sold on credit
____
____
____
Payment is made to trade creditors for previous purchases
____
____
____
A cash dividend is declared and paid
____
____
____
Cash is obtained through short- term bank loans
____
____
____
Short- term notes receivable are sold at a discount
____
____
____
Marketable securities are sold below cost
____
____
____
Advances are made to employees
____
____
____
Current operating expenses are paid
____
____
____
Short- term promissory notes are issued to trade creditors in exchange for past due accounts payable
____
____
____
10- year notes are issued to pay off accounts payable
____
____
____
A fully depreciated asset is retired
____
____
____
Accounts receivable are collected
____
____
____
Equipment is purchased with short- term notes
____
____
____
Merchandise is purchased on credit
____
____
____
The estimated taxes payable are increased
____
____
____
Total Current Assets
Current Ratio
Effect on Net Income
Cash is acquired through issuance of additional common stock
____
____
____
Merchandise is sold for cash
____
____
____
Federal income tax due for the previous year is paid
____
____
____
A fixed asset is sold for less than book value
____
____
____
A fixed asset is sold for more than book value
____
____
____
Merchandise is sold on credit
____
____
____
Payment is made to trade creditors for previous purchases
____
____
____
A cash dividend is declared and paid
____
____
____
Cash is obtained through short- term bank loans
____
____
____
Short- term notes receivable are sold at a discount
____
____
____
Marketable securities are sold below cost
____
____
____
Advances are made to employees
____
____
____
Current operating expenses are paid
____
____
____
Short- term promissory notes are issued to trade creditors in exchange for past due accounts payable
____
____
____
10- year notes are issued to pay off accounts payable
____
____
____
A fully depreciated asset is retired
____
____
____
Accounts receivable are collected
____
____
____
Equipment is purchased with short- term notes
____
____
____
Merchandise is purchased on credit
____
____
____
The estimated taxes payable are increased
____
____
____
Explanation / Answer
The answer to the above question is as follows:
Cash is acquired through issuance of additional common stock
+
+
0
Merchandise is sold for cash
+
+
+
Federal income tax due for the previous year is paid
-
0
0
A fixed asset is sold for less than book value
+
+
-
A fixed asset is sold for more than book value
+
+
+
Merchandise is sold on credit
+
+
+
Payment is made to trade creditors for previous purchases
-
0
0
A cash dividend is declared and paid
-
-
0
Cash is obtained through short- term bank loans
+
0
0
Short- term notes receivable are sold at a discount
-
-
0
Marketable securities are sold below cost
+
+
0
Advances are made to employees
+
+
-
Current operating expenses are paid
-
-
-
Short- term promissory notes are issued to trade creditors in exchange for past due accounts payable
0
0
0
10- year notes are issued to pay off accounts payable
0
+
0
A fully depreciated asset is retired
0
0
0
Accounts receivable are collected
0
0
0
Equipment is purchased with short- term notes
+
+
0
Merchandise is purchased on credit
0
-
-
The estimated taxes payable are increased
+
+
-
Please do provide feedback whether the answer provided is as per your requirement or not.
Total Current Assets Current Ratio Efect on Net IncomeCash is acquired through issuance of additional common stock
+
+
0
Merchandise is sold for cash
+
+
+
Federal income tax due for the previous year is paid
-
0
0
A fixed asset is sold for less than book value
+
+
-
A fixed asset is sold for more than book value
+
+
+
Merchandise is sold on credit
+
+
+
Payment is made to trade creditors for previous purchases
-
0
0
A cash dividend is declared and paid
-
-
0
Cash is obtained through short- term bank loans
+
0
0
Short- term notes receivable are sold at a discount
-
-
0
Marketable securities are sold below cost
+
+
0
Advances are made to employees
+
+
-
Current operating expenses are paid
-
-
-
Short- term promissory notes are issued to trade creditors in exchange for past due accounts payable
0
0
0
10- year notes are issued to pay off accounts payable
0
+
0
A fully depreciated asset is retired
0
0
0
Accounts receivable are collected
0
0
0
Equipment is purchased with short- term notes
+
+
0
Merchandise is purchased on credit
0
-
-
The estimated taxes payable are increased
+
+
-
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