Question

Data pertaining to the current position of Forte Company follow:

Cash	$430,000
Marketable securities	160,000
Accounts and notes receivable (net)	330,000
Inventories	700,000
Prepaid expenses	50,000
Accounts payable	240,000
Notes payable (short-term)	245,000
Accrued expenses	285,000

Required:

1.

Compute (A) the working capital, (B) the current ratio, and (C) the quick ratio. Round ratios to one decimal place.

2.

Compute the working capital, the current ratio, and the quick ratio after each of the following transactions and record the results in the appropriate columns of the table provided. Consider each transaction separately and assume that only that transaction affects the data given. Round ratios to one decimal place. A. Sold marketable securities at no gain or loss, $50,000. B. Paid accounts payable, $105,000. C. Purchased goods on account, $105,000. D. Paid notes payable, $120,000. E. Declared a cash dividend, $160,000. F. Declared a common stock dividend on common stock, $35,000. G. Borrowed cash from bank on a long-term note, $200,000. H. Received cash on account, $120,000. I. Issued additional shares of stock for cash, $565,000. J. Paid cash for prepaid expenses, $10,000.

Answer 1

Page No 0 Answers Amount $430,000 $160,000 $ 330,000 $ 700,000 $50,000 Particular Cash Marketable Securities Accounts and note creceivable (net) Inventories Prepaid expenses Total current assets Accounts payable ilotes payable (shoot - term) Accicred expenses Total current liabilities $1670,000 $249000 $245,000 285000 ***0,000 Total current assets – Total Current liabilibies coooking capital 's = 1670,000:- +70,000 = $900,000

Page: No 1.. woorking capital = $900,000 Current galio Current ratio : Total current assets Total aurrent liabilities 1670,000 770,000 = 2.1688 2.2 1.. Current ratio - Qua Quick viabio Quick cratio - - Quick assets Total current liabilities Quick assets. Toted assets -- inventories - Prepaid expenses e 1670,000.- 400,000 - 50,000 = $920,000 Quick matio 920,000 = 770,000 1.1948 1.2 . Quick ratio = 112 ]

Page No ③ In this case, the sale proceeds from marketable sour - ities are added % cash and cash is the part of current assets i Therefore, the ratios will siemais sume as case o i woothing capitale $900,000 Cuvient vratio - 2002 Quicki vratio = 12