Effect of transactions on current position analysis Data pertaining to the current position of Forte Company follow: Cash $412,500 Marketable securities 187,500 Accounts and notes receivable (net) 300,000 Inventories 700,000 Prepaid expenses 50,000 Accounts payable 200,000 Notes payable (short-term) 250,000 Accrued expenses 300,000 1. Compute (a) the working capital, (b) the current ratio, and (c) the quick ratio. Round to one decimal place.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Effect of transactions on current position analysis
Data pertaining to the current position of Forte Company follow:
| Cash | $412,500 |
| Marketable securities | 187,500 |
| Accounts and notes receivable (net) | 300,000 |
| Inventories | 700,000 |
| Prepaid expenses | 50,000 |
| Accounts payable | 200,000 |
| Notes payable (short-term) | 250,000 |
| Accrued expenses | 300,000 |
1. Compute (a) the
Working Capital: $fill in the blank 1
Current Ratio: fill in the blank 2
Quick Ratio: fill in the blank 3
2. Compute the working capital, the current ratio, and the quick ratio after each of the following transactions, and record the results in the appropriate columns. Consider each transaction separately and assume that only that transaction affects the data given. Round to one decimal place.
a. Sold marketable securities at no gain or loss, $70,000.
b. Paid accounts payable, $125,000.
c. Purchased goods on account, $110,000.
d. Paid notes payable, $100,000.
e. Declared a cash dividend, $150,000.
f. Declared a common stock dividend on common stock, $50,000.
g. Borrowed cash from bank on a long-term note, $225,000.
h. Received cash on account, $125,000.
i. Issued additional shares of stock for cash, $600,000.
j. Paid cash for prepaid expenses, $10,000.
| Transaction | Working Capital | Current Ratio | Quick Ratio |
| a. | $fill in the blank 4 | fill in the blank 5 | fill in the blank 6 |
| b. | fill in the blank 7 | fill in the blank 8 | fill in the blank 9 |
| c. | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 |
| d. | fill in the blank 13 | fill in the blank 14 | fill in the blank 15 |
| e. | fill in the blank 16 | fill in the blank 17 | fill in the blank 18 |
| f. | fill in the blank 19 | fill in the blank 20 | fill in the blank 21 |
| g. | fill in the blank 22 | fill in the blank 23 | fill in the blank 24 |
| h. | fill in the blank 25 | fill in the blank 26 | fill in the blank 27 |
| i. | fill in the blank 28 | fill in the blank 29 | fill in the blank 30 |
| j. | fill in the blank 31 | fill in the blank 32 | fill in the blank 33 |
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