Accounting Problems
Not what you're looking for?
What are the effects of these transactions + increase, - decrease, and 0 no effect, assuming a Current Ratio of more than 1 to 1:
Total Effect
Current Current on Net
Assets Ratio Income
a. Cash is acquired through issuance of additional common stock.
b. Merchandise is sold for cash.
c. Federal income tax due for the previous year is paid.
d. A fixed asset is sold for less than book value.
e. A fixed asset is sold for more than book value.
f. Merchandise is sold on credit.
g. Payment is made to trade creditors for previous purchases.
h. A cash dividend is declared and paid.
i. Cash is obtained through short-term bank loans.
j. Short-term notes receivable are sold at a discount.
Purchase this Solution
Solution Summary
This solution is comprised of a detailed explanation to answer what are the effects of these transactions + increase, - decrease, and 0 no effect.
Solution Preview
What are the effects of these transactions + increase, - decrease, and 0 no effect, assuming a Current Ratio of more than 1 to 1:
Total Effect
Current Current on Net
Assets Ratio Income
First, we need to understand that current ratio is Current Assets/Current Liabilities. If Current Ratio is more than 1 to 1, it means Current Assets are higher than Current Liabilities.
a. Cash is acquired through issuance of additional common stock.
+ + 0
Cash is part of current assets. If cash is increased, then the current assets will increase. Thereby, current ratio will also increase. However, it will not effect on net income because cash is acquired from common stock.
b. Merchandise is sold for cash.
0 0 +
Cash and merchandise are both current assets. When merchandise is sold for cash, merchandise will decrease, but cash will also increase at the same amount. Therefore, there is no effect on both total current assets and to current ratio. For net income, as it is regarded as sales, it will increase the ...
Purchase this Solution
Free BrainMass Quizzes
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Introduction to Finance
This quiz test introductory finance topics.