Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

Exercise 5

Effect of transactions on liquidity measures Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows:

Required:
a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2016.
b. Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2017. 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. (Hint: It may be helpful to use the horizontal model or to record the journal entry(ies) for each item before considering the effects on liquidity measures.)