tyson Company's working capital accounts at December 31, 2018, are given below: Current Assets: Cash $100,000 Marketable Securities 50,000 Accounts Receivable $250,000 Less Allowance for Doubtful Accounts (20,000) 230,000 Inventory, Lifo 300,000 Prepaid 8,000 Total Current Assets $688,000 Current Liabilities: Accounts Payable $200,000 Notes Payable 50,000 Taxes Payable 10,000 Accrued Liabilities 30,000 Total Current Liabilities $290,000 During 2019, DeCort Company completed the following transactions: a. Purchased fixed assets for cash, $20,000. b. Exchanged DeCort Company common stock for land. Estimated value of transaction, $80,000. c. Payment of $40,000 on short-term notes payable. d. Sold marketable securities costing $20,000 for $25,000 cash. e. Sold DeCort Company common stock for $70,000. f. Wrote off an account receivable in the amount of $20,000. g. Paid a cash dividend in the amount of $5,000 h. Sold inventory costing $10,000 for $15,000 cash. i. Paid accounts payable in the amount of $20,000. j. Sold marketable securities costing $20,000 for $20,000 cash. Required: a. Compute the following as of December 31, 2018: 1. working capital 2. current ratio 3. acid-test ratio (conservative) 4. cash ratio (These ratios are to be computed using only the December 31, 2008 data.) b. For 2019, indicate the effect of each of the transactions given on working capital, current ratio, acid-test ratio, and cash ratio. Give the effect in terms of +, - , or none. Consider each transaction to be the first transaction of the year. Assume at the start of the year that the current ratio is over 2 to 1, the acid-test ratio is over 1 to 1, and the cash ratio is less than 1 to 1. Format: The Effect On Acid- Working Current Test Cash Transaction Capital Ratio Ratio Ratio
- tyson Company's
working capital accounts at December 31, 2018, are given below:
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Current Assets: |
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Cash |
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$100,000 |
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Marketable Securities |
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50,000 |
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Accounts Receivable |
$250,000 |
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Less Allowance for Doubtful Accounts |
(20,000) |
230,000 |
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Inventory, Lifo |
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300,000 |
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Prepaid |
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8,000 |
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Total Current Assets |
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$688,000 |
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Current Liabilities: |
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Accounts Payable |
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$200,000 |
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Notes Payable |
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50,000 |
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Taxes Payable |
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10,000 |
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Accrued Liabilities |
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30,000 |
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Total Current Liabilities |
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$290,000 |
During 2019, DeCort Company completed the following transactions:
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a. |
Purchased fixed assets for cash, $20,000. |
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b. |
Exchanged DeCort Company common stock for land. Estimated value of transaction, $80,000. |
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c. |
Payment of $40,000 on short-term notes payable. |
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d. |
Sold marketable securities costing $20,000 for $25,000 cash. |
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e. |
Sold DeCort Company common stock for $70,000. |
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f. |
Wrote off an account receivable in the amount of $20,000. |
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g. |
Paid a cash dividend in the amount of $5,000 |
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h. |
Sold inventory costing $10,000 for $15,000 cash. |
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i. |
Paid accounts payable in the amount of $20,000. |
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j. |
Sold marketable securities costing $20,000 for $20,000 cash. |
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Required:
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a. |
Compute the following as of December 31, 2018: |
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1. |
working capital |
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2. |
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3. |
acid-test ratio (conservative) |
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4. |
cash ratio |
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(These ratios are to be computed using only the December 31, 2008 data.) |
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b. |
For 2019, indicate the effect of each of the transactions given on working capital, current ratio, acid-test ratio, and cash ratio. Give the effect in terms of +, - , or none. Consider each transaction to be the first transaction of the year. Assume at the start of the year that the current ratio is over 2 to 1, the acid-test ratio is over 1 to 1, and the cash ratio is less than 1 to 1. |
Format:
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The Effect On |
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Acid- |
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Working |
Current |
Test |
Cash |
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Transaction |
Capital |
Ratio |
Ratio |
Ratio |
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