Tyson Company's working capital accounts at December 31, 2018, are given below: Current Assets: Cash $100,000 50,000 Marketable Securities Accounts Receivable Less Allowance for Doubtful Accounts $250,000 (20,000) Inventory, LIFO Prepaid Total Current Assets 230,000 300,000 8,000 $688,000 Current Liabilities: Accounts Payable Notes Payable Taxes Payable Accrued Liabilities Total Current Liabilities $200,000 50,000 10,000 30,000 $290.000 During 2019, Tyson Company completed the following transactions: Purchased fixed а. b. Exchanged Tyson Company common stock for land. Estimated value of transaction, for cash, $20,000. $80,000. Payment of $40,000 on short-term notes payable. d. с. Sold marketable securities costing $20,000 for $25,000 cash. Sold Tyson Company common stock for $70,000. f. е. Wrote off an account receivable in the amount of $20,000. Declared a cash dividend in the amount of $5,000. Paid the above cash dividend. i. g. h. Sold inventory costing $10,000 for $15,000 cash. Sold inventory costing $5,000 for $8,000 on account. j. k. Paid accounts payable in the amount of $20,000. 1. Sold marketable securities costing $20,000 for $20,000 cash. Issued a credit memo on an account receivable, $1,000. m. Required: Compute the following for Tyson company as of December 31, 2018: 1. working capital 2. а. current ratio Acid-test ratio (conservative) Cash ratio 3. 4. (These ratios are to be computed using only the December 31, 2018 data.) b. For 2019, indicate the effect of each of the transactions given on working capital, current ratio, acid-test ratio, and cash ratio of Tyson Company. Give the effect in terms of +, -, or none. Consider each transaction to be the first transaction of the year. Assume at the start of the year that Tyson Company's current ratio is over 2 to 1, the acid-test ratio is over 1 to 1, and the cash ratio is less than 1 to 1. (Hint: You may use a table to answer this question)
Tyson Company's working capital accounts at December 31, 2018, are given below: Current Assets: Cash $100,000 50,000 Marketable Securities Accounts Receivable Less Allowance for Doubtful Accounts $250,000 (20,000) Inventory, LIFO Prepaid Total Current Assets 230,000 300,000 8,000 $688,000 Current Liabilities: Accounts Payable Notes Payable Taxes Payable Accrued Liabilities Total Current Liabilities $200,000 50,000 10,000 30,000 $290.000 During 2019, Tyson Company completed the following transactions: Purchased fixed а. b. Exchanged Tyson Company common stock for land. Estimated value of transaction, for cash, $20,000. $80,000. Payment of $40,000 on short-term notes payable. d. с. Sold marketable securities costing $20,000 for $25,000 cash. Sold Tyson Company common stock for $70,000. f. е. Wrote off an account receivable in the amount of $20,000. Declared a cash dividend in the amount of $5,000. Paid the above cash dividend. i. g. h. Sold inventory costing $10,000 for $15,000 cash. Sold inventory costing $5,000 for $8,000 on account. j. k. Paid accounts payable in the amount of $20,000. 1. Sold marketable securities costing $20,000 for $20,000 cash. Issued a credit memo on an account receivable, $1,000. m. Required: Compute the following for Tyson company as of December 31, 2018: 1. working capital 2. а. current ratio Acid-test ratio (conservative) Cash ratio 3. 4. (These ratios are to be computed using only the December 31, 2018 data.) b. For 2019, indicate the effect of each of the transactions given on working capital, current ratio, acid-test ratio, and cash ratio of Tyson Company. Give the effect in terms of +, -, or none. Consider each transaction to be the first transaction of the year. Assume at the start of the year that Tyson Company's current ratio is over 2 to 1, the acid-test ratio is over 1 to 1, and the cash ratio is less than 1 to 1. (Hint: You may use a table to answer this question)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Tyson Company's working capital accounts at December 31, 2018, are given below:
Current Assets:
Cash
$100,000
Marketable Securities
Accounts Receivable
50,000
$250,000
(20,000)
Less Allowance for Doubtful Accounts
Inventory, LIFO
Prepaid
Total Current Assets
230,000
300,000
8,000
$688,000
Current Liabilities:
Accounts Payable
Notes Payable
Taxes Payable
$200,000
50,000
10,000
Accrued Liabilities
Total Current Liabilities
30,000
$290.000
During 2019, Tyson Company completed the following transactions:
Purchased fixed assets for cash, $20,000.
b.
а.
Exchanged Tyson Company common stock for land. Estimated value of
transaction,
$80,000.
Payment of $40,000 on short-term notes payable.
d.
с.
Sold marketable securities costing $20,000 for $25,000 cash.
Sold Tyson Company common stock for $70,000.
f.
е.
Wrote off an account receivable in the amount of $20,000.
Declared a cash dividend in the amount of $5,000.
g.
h.
Paid the above cash dividend.
Sold inventory costing $10,000 for $15,000 cash.
j.
į.
Sold inventory costing $5,000 for $8,000 on account.
k.
Paid accounts payable in the amount of $20,000.
Sold marketable securities costing $20,000 for $20,000 cash.
Issued a credit memo on an account receivable, $1,000.
1.
m.
Required:
Compute the following for Tyson company as of December 31, 2018:
1. working capital
а.
2.
current ratio
3.
Acid-test ratio (conservative)
4.
Cash ratio
(These ratios are to be computed using only the December 31, 2018 data.)
b.
For 2019, indicate the effect of each of the transactions given on working capital,
current ratio, acid-test ratio, and cash ratio of Tyson Company. Give the effect in terms
of +, -, or none. Consider each transaction to be the first transaction of the year. Assume
at the start of the year that Tyson Company's current ratio is over 2 to 1, the acid-test
ratio is over 1 to 1, and the cash ratio is less than 1 to 1. (Hint: You may use a table to
answer this question)
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