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P11-8 Effect of transactions on liquidity measures

P11-8 Effect of transactions on liquidity measures
Requirement 1:
Calculate the working capital, current ratio, and acid-test ratio for Tice Company as of September 30, 2010.
Requirement 2:
Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2011.

1. Credit sales for the year amounted to $240,000. The cost of goods sold was $156,000.
2. Collected accounts receivable, $252,000.
3. Purchased inventory on account, $168,000.
4. Issued 500 shares of common stock for $18 per share.
5. Wrote off $7,000 of uncollectible accounts using the allowance for bad debts.
6. Declared and paid a cash dividend, $20,000.
7. Sold marketable securities costing $26,000 for $31,000 in cash.
8. Recorded insurance expense for the year, $12,000.The premium for the policy was paid in June 2010.
9. Borrowed cash on a short-term bank loan, $10,000.
10. Repaid principal of $40,000 and interest of $3,000 on a long-term bank loan.
Write the journal entry for each item.

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Solution Summary

P11-8 Effect of transactions on liquidity measures
Requirement 1:
Calculate the working capital, current ratio, and acid-test ratio for Tice Company as of September 30, 2010.
Requirement 2:
Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2011.

1. Credit sales for the year amounted to $240,000. The cost of goods sold was $156,000.
2. Collected accounts receivable, $252,000.
3. Purchased inventory on account, $168,000.
4. Issued 500 shares of common stock for $18 per share.
5. Wrote off $7,000 of uncollectible accounts using the allowance for bad debts.
6. Declared and paid a cash dividend, $20,000.
7. Sold marketable securities costing $26,000 for $31,000 in cash.
8. Recorded insurance expense for the year, $12,000.The premium for the policy was paid in June 2010.
9. Borrowed cash on a short-term bank loan, $10,000.
10. Repaid principal of $40,000 and interest of $3,000 on a long-term bank loan.
Write the journal entry for each item.

$2.19