Question 1

Effect of transactions on current position analysis

Data pertaining to the current position of Forte Company follow:

Line Item Description	Amount
Cash	$412,500
Marketable securities	187,500
Accounts and notes receivable (net)	300,000
Inventories	700,000
Prepaid expenses	50,000
Accounts payable	200,000
Notes payable (short-term)	250,000
Accrued expenses	300,000

1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round to one decimal place.

Line Item Description	Answer
Working Capital	$fill in the blank 1
Current Ratio	fill in the blank 2
Quick Ratio	fill in the blank 3

2. 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. Round to one decimal place.

a. Sold marketable securities at no gain or loss, $70,000.

b. Paid accounts payable, $125,000.

c. Purchased goods on account, $110,000.

d. Paid notes payable, $100,000.

e. Declared a cash dividend, $150,000.

f. Declared a common stock dividend on common stock, $50,000.

g. Borrowed cash from bank on a long-term note, $225,000.

h. Received cash on account, $125,000.

i. Issued additional shares of stock for cash, $600,000.

j. Paid cash for prepaid expenses, $10,000.

Transaction	Working Capital	Current Ratio	Quick Ratio
a.	$fill in the blank 4	fill in the blank 5	fill in the blank 6
b.	fill in the blank 7	fill in the blank 8	fill in the blank 9
c.	fill in the blank 10	fill in the blank 11	fill in the blank 12
d.	fill in the blank 13	fill in the blank 14	fill in the blank 15
e.	fill in the blank 16	fill in the blank 17	fill in the blank 18
f.	fill in the blank 19	fill in the blank 20	fill in the blank 21
g.	fill in the blank 22	fill in the blank 23	fill in the blank 24
h.	fill in the blank 25	fill in the blank 26	fill in the blank 27
i.	fill in the blank 28	fill in the blank 29	fill in the blank 30
j.	fill in the blank 31	fill in the blank 32	fill in the blank 33