Accounting 26th Edition by Carl Warren ,Jim Reeve ,Jonathan Duchac

Exercise 25

Effect of transactions on current position analysis
Data pertaining to the current position of Lucroy Industries Inc. are as follows:

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:

compute the working capital, the current ratio, and the quick ratio after each of the following transactions, andrecord the results in the appropriate columns. Consider each transaction separately and assume that only that transactiom affects the data given. Round to one decimal place.
a. Sold marketable securities at no gain or loss, $500,000.
b. Paid accounts payable, $287,500.
c. Purchased goods on account, $400,000.
d. Paid notes payable, $125,000.
e. Declared a cash dividend, $325,000.
f. Declared a common stock dividend on common stock, $150,000.
g. Borrowed cash from bank on a long-term note, $1,000,000.
h. Received cash on account, $75,000.
i. Issued additional shares of stock for cash, $2,000,000.
j. Paid cash for prepaid expenses, $200,000