Question: Data pertaining to the current position of Newlan Company are

Data pertaining to the current position of Newlan Company are as follows:
Cash ............... $ 80,000
Temporary investments ....... 160,000
Accounts and notes receivable (net) .. 235,000
Inventories ............ 190,000
Prepaid expenses .......... 10,000
Accounts payable .......... 158,000
Notes payable (short-term) ....... 80,000
Accrued expenses ........... 12,000

1. Compute
(a) The working capital,
(b) The current ratio, and
(c) The quick ratio.
2. List the following captions on a sheet of paper:
Transaction Working Capital Current Ratio Quick Ratio

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 above. Round to one decimal place.
a. Sold temporary investments at no gain or loss, $50,000.
b. Paid accounts payable, $40,000.
c. Purchased goods on account, $75,000.
d. Paid notes payable, $30,000.
e. Declared a cash dividend, $15,000.
f. Declared a stock dividend on common stock, $24,000.
g. Borrowed cash from bank on a long-term note, $150,000.
h. Received cash on account, $72,000.
i. Issued additional shares of stock for cash, $300,000.
j. Paid cash for prepaid expenses, $10,000.

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  • CreatedFebruary 04, 2014
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