10 Nov Effect of transactions on current ratio and workin
Effect of transactions on current ratio and working capitalDahle Company has a current ratio of 2:1 on June 30, 2006. Indicate whether each of the following transactions would increase (+), decrease (-), or not affect (NA) Dahle’s current ratio and its working capital.Requireda. Issued 10-year bonds for $100,000 cash.b. Paid cash to settle an account payable.c. Sold merchandise for more than cost.d. Recognized depreciation on plant equipment.e. Purchased a machine by issuing a long-term note payable.f. Purchased merchandise inventory on account.g. Received customer payment on account receivable.h. Paid cash for federal income tax expense (assume that the expense has not been previously accrued).i. Declared cash dividend payable in one month.j. Received cash for interest on a long-term note receivable (assume that interest has not been previously accrued).k. Received cash from issuing a short-term note payable.l. Traded a truck for a sedan.
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