Problem:
The president of Starz Enterprises asks if you could indicate the impact certain transactions have on the following ratios:
Average
Transactions Current Ratio Recievables Turnover Collection
(2:1) (10X) Period
(36.5 day)
1) Reorded $2500 sales on account. The cost of goods sold was 1,500.
2) Recorded bad debts expense of $500 using allowance method.
3) Wrote off a $100 account receivable as uncollectable.
4) Received $3,000 on cash sale. The cost of the goods sold was $1,800.
Complete the table indicating whether each transaction will increase (I), decrease (D) or have no effect (NE) on the specific ratios provided for Starz Enterprises.