Assume Cummings, Inc., a leading diesel engine manufacturer, enters into the following transactions during 2020.

1. Purchased inventory on account.
2. Purchased plant machinery by issuing long-term debt.
3. Made a principal payment on long-term debt.
4. Paid salaries and wages expense of the current period.
5. Sold inventory on account for 20 percent over cost.
6. Issued stock for cash.

The fiscal 2019 balance sheet of Cummings is as follows (dollars in millions). The 2018 balance sheet showed total assets of $19,062 and shareholders' equity of $8,259.

Fill in a chart like the following one by indicating whether each transaction would increase (+), decrease (-), or have no effect (NE) on the quick ratio, current ratio, and capital structure leverage ratio. Treat each transaction independently.

Transcribed Image Text:

Assets Liabilities and Shareholders' Equity Cash and marketable securities $ 1,470 Current liabilities $ 6,260 Other current assets 7,917 Long-term liabilities 5,012 Long-lived assets 10,350 Shareholders' equity 8,465 Total liabilities and Total assets $19,737 shareholders' equity $19,737