Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 11, Problem 11.12P
Problem 11.12
LO 1
Effect of transactions on liquidity measures Selected balance sheet accounts for Tibbetts Company on September 30, 2016, are as follows:
| Cash | $ 48,000 |
| Marketable securities | 87,000 |
| Accounts receivable, net | 129,000 |
| Inventory | 135,000 |
| Prepaid expenses | 21.000 |
| Total current assets | $420,000 |
| Accounts payable | $147,000 |
| Other accrued liabilities | 33,000 |
| Short-term debt | 60.000 |
| Total current liabilities | $240,000 |
Required:
- Calculate the
working capital ,current ratio , and acid-test ratio for Tibbetts Company as of September 30, 2016. - Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2017. Indicate the effect of each item on Tibbetts Company’s working capital, current ratio, and acid-test ratio. Use + for increase, - for decrease, and (NE) for no effect. (Hint: It may be helpful to use the horizontal model or to record the
journal entry (ies)for each item
| before considering the effects on liquidity measures.) | |||
| Transaction/Event | Working | ||
Capital
Ratio
Ratio
- Credit sales for the year amounted to $360,000. The cost of goods sold was $234,000.
- Collected accounts receivable, $378,000.
- Purchased inventory on account, $252,000.
- Issued 250 shares of common stock for $54 per share.
- Wrote off $10,500 of uncollectible accounts using the allowance for
bad debts. - Declared and paid a cash dividend, $30,000.
- Sold marketable securities costing $39,000 for $46,500 in cash.
- Recorded insurance expense for the year, $ 18,000. The premium for the policy was paid in June 2016.
- Borrowed cash on a short-term bank loan, $15,000.
- Repaid principal of $60,000 and interest of $4,500 on a long-term bank loan.
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Problem 11-12 (Algo) Effect of transactions on liquidity measures LO 1
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows:
Cash
$
48,000
Marketable securities
135,000
Accounts receivable, net
165,000
Inventory
187,500
Prepaid expenses
21,000
Total current assets
$
556,500
Accounts payable
$
108,000
Other accrued liabilities
26,400
Short-term debt
48,000
Total current liabilities
$
182,400
Required:
Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019.
Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2020. Prepare journal entries for the below transactions and Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, − for decrease, and (NE) for no effect.
Credit sales for the year amounted to…
Question 24
Muscarella Inc. has the following balance sheet and income statement data:
Cash
$ 14,000
Accounts payable
$ 42,000
Receivables
70,000
Other current liabilities
28,000
Inventories
210,000
Total CL
$ 70,000
Total CA
$294,000
Long-term debt
70,000
Net fixed assets
126,000
Common equity
280,000
Total assets
$420,000
Total liab. and equity
$420,000
Sales
$280,000
Net income
$ 21,000
The new CFO thinks that inventories are excessive and could be lowered sufficiently to cause the current ratio to equal the industry average, 2.70, without affecting either sales or net income. Assuming that inventories are sold off and not replaced to get the current ratio to the target level, and that the funds generated are used to buy back common stock at book value, by how much would the ROE change?
a.
4.28%
b.
5.21%
c.
4.73%
d.
4.50%
e.
4.96%
rq a
Problem 11-12 (Algo) Effect of transactions on liquidity measures LO 1
Selected balance sheet accounts for Tibbetts Company on September 30, 2019, are as follows:
Cash
$
48,000
Marketable securities
135,000
Accounts receivable, net
165,000
Inventory
187,500
Prepaid expenses
21,000
Total current assets
$
556,500
Accounts payable
$
108,000
Other accrued liabilities
26,400
Short-term debt
48,000
Total current liabilities
$
182,400
Required:
Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2019.
Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2020. Prepare journal entries for the below transactions and Indicate the effect of each item on Tibbetts Company's working capital, current ratio, and acid-test ratio. Use + for increase, − for decrease, and (NE) for no effect.
Credit sales for the year…
Chapter 11 Solutions
Accounting: What the Numbers Mean
Ch. 11 - Prob. 11.1MECh. 11 - Calculate activity measures The following...Ch. 11 - Prob. 11.3MECh. 11 - Prob. 11.4MECh. 11 - Prob. 11.5ECh. 11 - Exercise 11.6 Obtain an annual report and discuss...Ch. 11 - Exercise 11.7 Effect of transactions on various...Ch. 11 - Prob. 11.8ECh. 11 - Prob. 11.9PCh. 11 - Problem 11.10 LQ 9 Prepare a common size balance...
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