Selected balance sheet accounts for Tibbetts Company on September 30, 2010, are as follows:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,000

Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . 58,000

Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . 86,000

Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,000

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . $280,000

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,000

Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . 22,000

Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . $160,000

Required:

a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2010.

b. Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2011. Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, − for decrease, and (NE) for no effect.

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Working Current Acid-Test Capital Example Ratio Ratio Paid accounts payable, $195,000. Credit sales for the year amounted to $240,000 The cost of goods sold was $156,000. Collected accounts receivable, $252,000 Purchased inventory on account, $168,000. Issued 250 shares of common stock for $36 per 1. 2. 3. 4. 5. Wrote off $7,000 of uncollectible accounts using the allowance for bad debts Declared and paid a cash dividend, $20,000. Sold marketable securities costing $26,000 for $31,000 in cash. Recorded insurance expense for the year, $12,000 The premium for the policy was paid in June 2010. Borrowed cash on a short-term bank loan, $10,000 Repaid principal of $40,000 and interest of $3,000 on a long-tem bank loan. 6. 7. 8. 9. 10.