The Lux Company experiences the following unrelated events and transactions during Year 1. The company’s existing current ratio is 2:1 and its quick ratio is 1.2:1. Lux wrote off $5,000 of accounts receivable as uncollectible. A bank notifies Lux that a customer’s check for $411 is returned marked insufficient funds. The customer is bankrupt.
The Lux Company experiences the following unrelated events and transactions during Year 1. The company’s existing
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Lux wrote off $5,000 of
accounts receivable as uncollectible. -
A bank notifies Lux that a customer’s check for $411 is returned marked insufficient funds. The customer is
bankrupt.
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The owners of Lux Company make an additional cash investment of $7,500.
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Inventory costing $600 is judged obsolete when a physical inventory is taken.
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Lux declares a $5,000 cash dividend to be paid during the first week of the next reporting period.
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Lux purchases long-term investments for $10,000.
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Accounts payable of $9,000 are paid.
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Lux borrows $1,200 from a bank and gives a 90-day, 6% promissory note in exchange.
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Lux sells a vacant lot for $20,000 that had been used in its operations.
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A three-year insurance policy is purchased for $1,500
Separately evaluate the immediate effect of each transaction on the company’s:
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