Question

Effect of Transactions on Current Position Analysis

Data pertaining to the current position of Newlan Company are as follows:

Cash	$258,500
Temporary investments	133,100
Accounts and notes receivable (net)	391,600
Inventories	304,400
Prepaid expenses	16,000
Accounts payable	124,600
Notes payable (short-term)	178,000
Accrued expenses	53,400

Instructions:

1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round the current ratio and the quick ratio to one decimal place.

Working capital		$
Current ratio
Quick ratio

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. Consider each transaction separately and assume that only that transaction affects the data given above. Format working capital as whole dollars. Round the current ratio and the quick ratio to one decimal place.

Transaction		Working Capital	Current Ratio	Quick Ratio
a. Sold temporary investments for cash at no gain or loss, $40,000.		$
b. Paid accounts payable, $71,000.		$
c. Purchased goods on account, $45,000.		$
d. Paid notes payable, $89,000.		$
e. Declared a cash dividend, $71,000.		$
f. Declared a stock dividend on common stock, $21,500.		$
g. Borrowed cash from bank on a long-term note, $178,000.		$
h. Received cash on account, $60,500.		$
i. Issued additional shares of stock for cash, $356,000.		$
j. Paid cash for prepaid expenses, $35,600.		$