(Solved by Humans)-PROBLEM 14–13 Effects of Transactions on Various Ratios [LO3] S e l ec t e d a m o u n t s f r o...

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  PROBLEM 14–13 Effects of Transactions on Various Ratios [LO3] Selected  amounts  from  Gullins  Limited’s  balance  sheet  from  the  beginning  of  the  year  are shown below:   Account Amount Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,000 Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000 Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 Plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 475,000 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 Notes due within one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,000 Bonds payable in five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 During the year, the company completed the following transactions (the first item, lettered “x,” is used below  as an example in the   requirements): x.    Sold inventory for cash: $25,000. a.       Declared a cash dividend: $20,000. b.       Purchased inventory on account: $50,000. c.       Sold inventory on account: $40,000. d.      Purchased equipment by issuing a short-term note payable due within one year: $100,000. e.       Paid a cash dividend previously declared: $15,000. f.        Paid accounts payables totalling $30,000. g.      Purchased inventory for cash: $60,000. h.      Wrote off uncollectible accounts in the amount of $5,000, reducing the accounts receivable balance accordingly. i.        Purchased temporary investments for cash: $10,000. j.        Repurchased common shares from several shareholders for cash: $50,000. k.       Paid short-term notes due: $60,000. Required: 1.              Compute the following amounts and ratios as of the beginning of the year: a.       Working capital. b.       Current ratio. c.       Acid-test ratio. 2.              Indicate the effect of each of the transactions given above on working capital, the current ratio, and the acid-test ratio. Give the effect in terms of increase, decrease, or none. Item (x) is given as an example of the format to use:             The Effect on   Transaction Working Capital Current Ratio Acid-Test Ratio (x) Sold inventory for cash . . . . . . . . . . . . . . . . . . . . . . . . None None Increase