Effect of transactions on current position analysis

Data pertaining to the current position of Forte Company are as follows:

 

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

Instructions

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

 

2.     List the following captions on a sheet of paper:

Transaction                              Working Capital                     Current Ratio                           Quick Ratio

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.