Indicate whether the following independent transactions increase () decrease (
) or do not affect (NE) the current ratio the amount of working capital and cash from operations. Also indicate the amounts of any effects. The company
presently has a current ratio of 2 to 1 along with current liabilities of $160000.
Current Ratio Effect
Cash from Operations
a. Paid accrued wages of $1000.
b. Purchased $20000 worth of material on account.
c. Received judgment notice from the court that the
company must pay $70000 damages for patent
infringement within six months.
d. Collected $8000 of accounts receivable.
e. Purchased land for factory for $100000 cash.
f. Repaid currently due bank note payable of $10000.
g. Received currently due note receivable of $15000 from
customer as consideration for sale of land.
h. Received cash of $90000 from stockholders as
i. Purchased machine costing $50000; $15000 down
and the balance to be paid in seven equal annual
j. Retired bonds maturing five years hence at par of
$50000. Bonds have unamortized premium of $2000.
k. Declared dividends of $10000 payable after year-end.
l. Paid the dividends in k in cash.
m. Declared a 5% stock dividend.
n. Paid the stock dividend in m.
o. Signed a long-term purchase contract of $100000 to
commence a year from now.
p. Borrowed $40000 cash for one year.
q. Paid accounts payable of $20000.
r. Purchase a patent for $20000.
s. Wrote off $15000 of current marketable securities that
t. $8500 of organization expenses were written off.
u. Recorded depreciation expense of $70000.
v. Sold $28000 of merchandise on account.
w. Sold a building for $90000 that had a book value of
x. Sold a machine at cost for $5000; received $2500
down and the balance receivable in six months.
y. Recorded income tax expense of $80000 half of which
is deferred (long term).