Notes Problems

Problem $1$

At the end of $2016,$ burger food truck The Patty Wagon's preliminary trial balance

indicated a current ratio of $1\mathrm{.}20.$ Management is contemplating paying some of its

accounts payable balance before the end of the fiscal year. Explain the effect this

transaction would have on the current ratio. Would your answer be the same if the

preliminary trial balance indicated a current ratio of $0\mathrm{.}8?$

Problem $2$

The current asset section of food truck Wok n$\text{'}$ Roll's balance sheet included cash

of $$30,000$ and accounts receivable of $$45,000.$ The only other current asset is

inventories. The company's current ratio is $2\mathrm{.}5$ and its acid$-$test ratio is $2\mathrm{.}0.$

Determine the ending balance in inventories and total current liabilities.

Problem $3$

Most decisions made by management impact the ratios analysts use to evaluate.

Indicate $($by letter$)$ whether each of the actions listed below will immediately

increase $($I$),$ decrease $($D$),$ or have no effect $($N$)$ on the ratios shown. Assume each

ratio is less than $1\mathrm{.}0$ before the action is taken.

Problem $3$

Most decisions made by management impact the ratios analysts use to evaluate.

Indicate $($by letter$)$ whether each of the actions listed below will immediately

increase $($I$),$ decrease $($D$),$ or have no effect $($N$)$ on the ratios shown. Assume each

ratio is less than $1\mathrm{.}0$ before the action is taken.