Question

Total Current assets Total Current Liabilities Net Working Capital Current Ratio
a. Cash is acquired through issuance of additional common stock. _________ _________ _________ _________
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 purchases. ___-______ _________ ___0______ ______+___
e. A cash dividend is declared and paid. ______-___ _________ _____0____ ___-______
f. A stock dividend is declared and paid. _________ _________ _________ _________
g. Cash is obtained through long-term bank loans. ______+___ _________ _____0____ _____-____
h. A profitable firm increases its fixed assets depreciation allowance account. _________ _________ _________ _________
i. Current operating expenses are paid. ______-___ _________ ______-___ ____-_____
j. Ten-year notes are issued to pay off accounts payable. _____0____ _________ ____0_____ ______+___
k. Accounts receivable are collected. _______0__ _________ ____0_____ ______0___
l. Equipment is purchased with short-term notes.
______0___ _________ ___0______ _____-__
m. Merchandise is purchased on credit. _______+___ _________ _____0____ ____-_____
n. The estimated taxes payable are increased. ______0___ _________ ____-_____ ______-___
o. Marketable securities are sold below cost. _______-__ _________ _____-____ ______-___
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.

Answer 1

a. Cash is acquired through issuance of additional common stock. +_______ _________ _________ _________

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 purchases. -_______ -_______ 0_______ +_______

e. A cash dividend is declared and paid. -_______ _________ 0_______ -_______

f. A stock dividend is declared and paid. _________ _________ _________ _________

g. Cash is obtained through long-term bank loans. +_______ _________ 0_______ -_______

h. A profitable firm increases its fixed assets depreciation allowance account. _________ _________ _________ _________

i. Current operating expenses are paid. -_______ _________ -_______ -_______

j. Ten-year notes are issued to pay off accounts payable. 0_______ -_______ 0_______ +_______

k. Accounts receivable are collected. 0_______ _________ 0_______ 0_______

l. Equipment is purchased with short-term notes.
0_______ +_______ 0_______ -_______

m. Merchandise is purchased on credit. +_______ +_______ 0_______ -_______

n. The estimated taxes payable are increased. 0_______ +_______ -_______ -_______

o. Marketable securities are sold below cost. -_______ _________ -_______ -_______