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Denna Companys working capital accounts at the beginning of the year follow: Cash $ 68,000 Marketable securities $ 26,200 Accounts receivable, net $ 345,200 Inventory $ 454,800 Prepaid expenses $ 7,600 Accounts payable $ 196,400 Notes due within one year $ 96,000 Accrued liabilities $ 58,200 During the year, Denna Company completed the following transactions: Ex. Paid a cash dividend previously declared, $28,000. Issued additional shares of common stock for cash, $196,000. Sold inventory costing $68,400 for $98,000, on account. Wrote off uncollectible accounts in the amount of $9,200, reducing the accounts receivable balance accordingly. Declared a cash dividend, $28,000. Paid accounts payable, $96,800. Borrowed cash on a short-term note with the bank, $57,000. Sold inventory costing $20,100 for $13,400 cash. Purchased inventory on account, $48,500. Paid off all short-term notes due, $153,000. Purchased equipment for cash, $73,400. Sold marketable securities costing $16,200 for cash, $13,500. Collected cash on accounts receivable, $77,800. 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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period.

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 (Ex) is given as an example. Consider each transaction independently and indicate their effects as compared to the ratios and amounts at the beginning of the period.

The Effect on Transaction Working Capital Current Ratio Acid-Test Ratio Ex. Paid a cash dividend previously declared None Increase Increase a. Issued capital stock for cash b. Sold inventory at a gain c. Wrote off uncollectible accounts d. Declared a cash dividend e. Paid accounts payable f. Borrowed on a short-term note g. Sold inventory at a loss h. Purchased inventory on account i. Paid short-term notes j. Purchased equipment for cash k. Sold marketable securities at a loss l. Collected accounts receivable

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