Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round to one decimal place.

Cash ……………………………………………………………… $560,000

Temporary investments ………………………………………. 520,000

Accounts and notes receivable (net) …………………………. 800,000

Inventories ……………………………………………………. 900,000

Prepaid expenses ……………………………………………… 100,000

Accounts payable …………………………………………….. 800,000

Notes payable (short-term) …………………………………… 700,000

Accrued expenses ……………………………………………. 300,000

Instructions

1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round to one decimal place.

2. List the following captions on a sheet of paper:

Transaction_____ Working Capital_______ Current Ratio______ Quick Ratio

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. Consider each transaction separately and assume that only that transaction affects the data given above. Round to one decimal place.

a. Sold temporary investments at no gain or loss, $200,000.

b. Paid accounts payable, $400,000.

c. Purchased goods on account, $150,000.

d. Paid notes payable, $380,000.

e. Declared a cash dividend, $220,000.

f. Declared a common share dividend on common shares, $200,000.

g. Borrowed cash from bank on a long-term note, $680,000.

h. Received cash on account, $110,000.

i. Issued additional shares for cash, $1,400,000.

j. Paid cash for prepaid expenses, $50,000.