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PROBLEM 15 14 Effects of Transactions on Various Ratios LO3 Selected amounts from Reingold Company’s balance sheet from the beginning of the year follow During the year the company complete

PROBLEM 15–14 Effects of Transactions on Various Ratios [LO3]

Selected amounts from Reingold Company’s balance sheet from the beginning of the year follow:

 

During the year, the company completed the following transactions:

i.         Purchased inventory on account, $50,000.

a.       Declared a cash dividend, $30,000.

b.       Paid accounts payable, $100,000.

c.        Collected cash on accounts receivable, $80,000.

d.       Purchased equipment for cash, $75,000.

e.        Paid a cash dividend previously declared, $30,000.

f.        Borrowed cash on a short-term note with the bank, $60,000.

g.        Sold inventory costing $70,000 for $100,000, on account.

h.       Wrote off uncollectible accounts in the amount of $10,000 reducing the accounts receivable balance accordingly.

 

i.         Sold marketable securities costing $12,000 for cash, $9,000.

j.         Issued additional shares of common stock for cash, $200,000.

k.       Paid off all short-term notes due, $160,000.

Required:

1.       Compute the following amounts and ratios as of the beginning of the year:

a.       Working capital.

b.       Current ratio.

c.        Acid-test ratio.

2.       Indicate the effect of each of the transactions given above on working capital, the current ratio, and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item (x) is given as an example of the format to use:

 

Jun 27 2020 View more View Less

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