Effect of transactions on liquidity measures
Selected balance sheet accounts for Tibbets Company on September 30, 2010, are as follows:
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $32,000
Marketable Securities. . . . . . . . . . . . . . . 58,000
Accounts Receivable. . . . . . . . . . . . . . . . 86,000
Prepaid Expenses. . . . . . . . . . . . . . . . . . 14,000
Total Current Assets. . . . . . . . . . . . . $280,000
Accounts Payable . . . . . . . . . . . . . . . . . $98,000
Other Accrued Liabilities. . . . . . . . . . . 22,000
Short-Term Debt. . . . . . . . . . . . . . . . . 40,000
Total Current Liabilities. . . . . . . . . $160,000
Required:
a. Calculate the working capital, current ratio, and acid-test ratio for Tibbetts Company as of September 30, 2010.
b. Summarized here are the transactions/events that took place during the fiscal year ended September 30, 2011. Indicate the effect of each item on Tibbetts Company’s working capital, current ratio, and acutest ratio. Use + for increase, - for decrease, and (NE) for no effect. (Hint: It may be helpful to use the horizontal model or to record the journal entry (ies) for each item before considering the effects on liquidity measures.)