Question

tio to the manager of a hotel? To 10. Of what value is the food sales/total sales ratio to them creditor? Requir 1. the following: total current with "+" indicate with "0." Assume Problems Problem 1 Indicate the effects of the transactions listed below on each of the following assets, working capital (CA - CL), and current ratio. Indicate increase with decrease with "-" and indicate no effect or effect cannot be determined with "0. an initial current ratio of greater than 1.0. Total Current Working Assets Capital 1. Food is sold for cash. 2. Equipment is sold at less than its net book value. 3. Beverages are sold on account. 4. A cash dividend is declared. 5. Accrued payroll is paid. 6. Treasury stock is purchased. 7. A fully depreciated fixed asset is retired. Current Ratio

Answer 1

		Total Current Assets	Working Capital	Current Ratio
1	Food is sold for cash	+	+	+	Since food must have been sold at profit
2	Equipment is sold at less than its net book value	+	+	+	Cash increased
3	Beverages are sold on account	+	+	+	Since beverage must have been sold at profit
4	A cash dividend is declared	0	-	-	Dividend payable recorded
5	Accrued Payroll is paid	-	0	+	Cash and salaries payable decreases
6	Treasury Stock is purchased	-	-	-	Cash is paid
7	A fully depreciated fixed assets is retired	0	0	0	No current asset or liability
8	Equipment is purchased with long term notes	0	0	0	No current asset or liability
9	Utility Expense paid	-	-	-	Cash is paid
10	A cash dividend is paid	-	-	-	Cash is paid