Problem: Selected balance sheet accounts for Tibbets Company on September 30,2008 are as follows;
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Cash
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$32,000
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Marketable securities
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58,000
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Accounts receivable, net
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86,000
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Inventory
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90,000
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Prepaid expenses
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14,000
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Total current assets
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$280,000
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Accounts payable
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$98,000
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Other accrued liabilities
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22,000
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Short-term debt
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40,000
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Total current liabilities
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$160,000
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a) Calculate working capital, current ratio, and acid-test ratio for Tibbets Company as of September 30, 2008.
b) Summarized below are transactions/events that took place during the fiscal year ended September 30,2009. Indicate the effect of each item on Tibbets Company working capital, current ratio, and acid-test ratio. Use + for increase, - for decrease, and (NE) for no effect.
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Working Capital
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Current Ratio
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Acid-Test Ratio
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1) Credit sales for the year amounted to $240,000.
The cost of goods sold was $156,000
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2) Collected accounts receivable, $252,000
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3) Purchased inventory on account, $1680,00
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4) Issued 250 shares of common stock for $36 a
share
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5) Wrote off $7,000 for uncollectible accounts using the allowance for bad debts
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6) Declared and paid cash dividend, $20,000
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7) Sold marketable securities costing $26,000 for
$31,000 in cash
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8) Recorded insurance expense for the year, $12,000
The premium for the policy was paid in June
2008
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9) Borrowed cash on a short-term bank loan,
$10,000
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10) Repaid principal of $40,000 and interest of
$3,000 on a long-term bank loan
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