Effect of Transactions on Current Position Analysis
Data pertaining to the current position of Lucroy Industries
Inc. are as follows:
| Cash |
$442,500 |
| Marketable securities |
162,500 |
| Accounts and notes receivable (net) |
335,000 |
| Inventories |
700,000 |
| Prepaid expenses |
42,000 |
| Accounts payable |
230,000 |
| Notes payable (short-term) |
235,000 |
| Accrued expenses |
320,000 |
Required:
1. Compute (a) the working capital, (b) the
current ratio, and (c) the quick ratio. Round ratios to one decimal
place.
| a. Working capital |
$897000 |
| b. Current ratio |
2.1 |
| c. Quick ratio |
1.2 |
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.
Consider each transaction separately and assume that only
that transaction affects the data given. Round ratios to one
decimal place.
| Transaction |
Working Capital |
Current Ratio |
Quick Ratio |
| a. Sold marketable securities at no gain or loss, $60,000. |
$ |
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| b. Paid accounts payable, $135,000. |
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| c. Purchased goods on account, $115,000. |
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| d. Paid notes payable, $115,000. |
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| e. Declared a cash dividend, $130,000. |
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| f. Declared a common stock dividend on common stock,
$35,000. |
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| g. Borrowed cash from bank on a long-term note, $230,000. |
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| h. Received cash on account, $105,000. |
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| i. Issued additional shares of stock for cash, $550,000. |
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| j. Paid cash for prepaid expenses, $8,000. |
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