Question: Effect of various transactions on financial statement ratios Indicate the effects

Effect of various transactions on financial statement ratios Indicate the effects (increase, decrease, no effect) of the following independent transactions on (1) earnings per share, (2) working capital (= current assets — current liabilities), and (3) the quick ratio, where accounts receivable are included but merchandise inventory is excluded from quick assets State any necessary assumptions.
a. A firm sells for $300,000, on account, merchandise inventory costing $240,000
b. A firm declares dividends of $160,000. It will pay the dividends during the next accounting period.
c. A firm purchases, on account, merchandise inventory costing $410,000.
d. A firm sells for $20,000 a machine costing $80,000 and with accumulated depreciation of $60,000.
e. Because of defects, a firm returns to the supplier merchandise inventory purchased for $1,000 cash. The firm receives a cash reimbursement.
f. A firm issues 10,000 shares of $10 par value common stock on the last day of the accounting period for $15 per share. It uses the proceeds to acquire the assets of another firm composed of the following: accounts receivable. $30,000; merchandise inventory, $60,000; plant, and equipment, $100,000. The acquiring firm also agrees to pay current liabilities of $40,000 of the acquired company.
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  • CreatedDecember 03, 2011
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