Effect of transactions on liquidity measures 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.

Â	Working	Current	Acid-Test
Example	Capital	Ratio	Ratio
Paid accounts payable, $195,000.	NE	+	+

1. Credit sales for the year amounted to $240,000. The cost of goods sold was $156,000.

2. Collected accounts receivable, $252,000.

3. Purchased inventory on account, $168,000.

4. Issued 250 shares of common stock for $36 per share.

5. Wrote off $7,000 of uncollectible accounts using the allowance for bad debts.

6. Declared and paid a cash dividend, $20,000.

7. Sold marketable securities costing $26,000 for $31,000 in cash.

8. Recorded insurance expense for the year, $12,000. The premium for the policy was paid in June 2010.

9. Borrowed cash on a short-term bank loan, $10,000.

10. Repaid principal of $40,000 and interest of $3,000 on a long-term bank loan