Question

Data pertaining to the current position of Forte Company follow:

Cash	$447,500
Marketable securities	180,000
Accounts and notes receivable (net)	325,000
Inventories	700,000
Prepaid expenses	46,000
Accounts payable	210,000
Notes payable (short-term)	240,000
Accrued expenses	300,000

Required:

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

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, $60,000. B. Paid accounts payable, $135,000. C. Purchased goods on account, $105,000. D. Paid notes payable, $100,000. E. Declared a cash dividend, $140,000. F. Declared a common stock dividend on common stock, $30,000. G. Borrowed cash from bank on a long-term note, $200,000. H. Received cash on account, $135,000. I. Issued additional shares of stock for cash, $610,000. J. Paid cash for prepaid expenses, $14,000.

Answer 1

Cash	4,47,500
	Marketable securities	1,80,000
	Accounts and notes receivable (net)	3,25,000
	Prepaid expenses	46,000
	Quick Assets	9,98,500
	Add : Inventories	7,00,000
	Current Assets	16,98,500
	Accounts payable	2,10,000
	Notes payable (short-term)	2,40,000
	Accrued expenses	3,00,000
	Current Liabilities	7,50,000
	(A) The working capital
	#NAME?	948500
	948500
	(B) The current ratio,
	#NAME?	2.3
	2.264666667
	(C) The quick ratio
		1.3
	1.331333333
	Sold marketable securities at no gain or loss 60,000
	If Marketable Securities sold, Then Cash Comes in after sale of the Securities. So the Current Assets remained same as before.
	Cash	6,27,500
	Marketable securities	0
	Accounts and notes receivable (net)	3,25,000
	Prepaid expenses	46,000
	Quick Assets	9,98,500
	Add : Inventories	7,00,000
	Current Assets	16,98,500
	Accounts payable	2,10,000
	Notes payable (short-term)	2,40,000
	Accrued expenses	3,00,000
	Current Liabilities	7,50,000
	(A) The working capital	9,48,500
	(B) The current ratio,	2.3
	(C) The quick ratio	1.3
	Paid accounts payable, 135,000
	Cash (447500-135000)	3,12,500
	Marketable securities	0
	Accounts and notes receivable (net)	3,25,000
	Prepaid expenses	46,000
	Quick Assets	6,83,500
	Add : Inventories	7,00,000
	Current Assets	13,83,500
	Accounts payable (210000-135000)	75,000
	Notes payable (short-term)	2,40,000
	Accrued expenses	3,00,000
	Current Liabilities	6,15,000
	(A) The working capital	7,68,500
	(B) The current ratio,	2.2
	(C) The quick ratio	1.1
	Purchased goods on account, 105,000.
	Cash	4,47,500
	Marketable securities	1,80,000
	Accounts and notes receivable (net)	3,25,000
	Prepaid expenses	46,000
	Quick Assets	9,98,500
	Add : Inventories (700000+105000)	8,05,000
	Current Assets	18,03,500
	Accounts payable (210000+105000)	3,15,000
	Notes payable (short-term)	2,40,000
	Accrued expenses	3,00,000
	Current Liabilities	8,55,000
	(A) The working capital	9,48,500
	(B) The current ratio,	2.1
	(C) The quick ratio	1.2
	Paid notes payable, 100,000.
	Cash (447500-100000)	3,47,500
	Marketable securities	1,80,000
	Accounts and notes receivable (net)	3,25,000
	Prepaid expenses	46,000
	Quick Assets	8,98,500
	Add : Inventories	7,00,000
	Current Assets	15,98,500
	Accounts payable	2,10,000
	Notes payable (short-term) (240000-100000)	1,40,000
	Accrued expenses	3,00,000
	Current Liabilities	6,50,000
	(A) The working capital	9,48,500
	(B) The current ratio,	2.5
	(C) The quick ratio	1.4