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Transactions: 1. Goods costing $200,000 are sold to customers on credit for $380,000. 2. Accounts...

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Accounting

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Transactions: 1. Goods costing $200,000 are sold to customers on credit for $380,000. 2. Accounts receivable of $140,000 are collected. 3. Inventory costing $110,000 is purchased from suppliers. 4. A long-term bank loan for $500,000 is arranged with the bank, and the company receives the cash at the beginning of the year. 5. The bank loan carries an interest rate of 18% and the interest payment is made at the end of the year. Assume no interest expense had previously been recognized. 6. The company uses $40,000 to buy short-term investments. 7. New common shares are issued for $250,000. State the immediate effect (increase, decrease, or no effect) of each transaction on each ratio. Two lists follow: one for ratios (including the ratio prior to the transactions) and another for transactions. Ratios: 1. Current ratio, 1.2:1 2. Quick ratio, 0.6:1 3. Accounts receivable turnover, 12 times 4. Inventory turnover, 6 times 5. Return on assets, 10% 6. Return on equity, 15%

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