The president of Screven Enterprises asks if you could indicate the impact certain transactions have on the following ratios.
|
Transaction
|
Current
Ratio
(2: 1)
|
Receivables
Turnover
(10 )
|
Average
Collection
Period
(36.5 days)
|
|
1. Received $5,000 on cash sale.
The cost of the goods sold was
$2,600.
|
|
|
|
|
2. Recorded bad debts expense of $500
using allowance method.
|
|
|
|
|
3. Wrote off a $100 account receivable
as uncollectible (Uses allowance
method.)
|
|
|
|
|
4. Recorded $2,500 sales on account.
The cost of the goods sold was
$1,500.
|
|
|
|
Instructions
Complete the table, indicating whether each transaction will increase (I), decrease (D), or have no effect (NE) on the specific ratios provided for Screven Enterprises.