Falcon Corporation Has Current Assets of $400,000 and Current Liabilities

question 71

Essay

Falcon Corporation has current assets of $400,000 and current liabilities of $275,000.
Required:
Compute the effect of each of the following transactions on Falcon's current ratio:
a.Refinanced a $60,000 long-term mortgage with a short-term note.
b.Purchasing $108,000 of merchandise inventory with short-term accounts payable.
c.Paying $50,000 of short-term accounts payable.
d.Collecting $90,000 of short-term accounts receivable.

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Definitions:

Deductions

Amounts subtracted from gross income to arrive at a lower taxable income, including expenses like mortgage interest, state taxes, or charitable donations on a tax return.

Gripe Session

An informal meeting where participants are free to express complaints and frustrations.

Staff Meeting

a scheduled gathering of employees facilitated by an organization to discuss operational matters, policies, or updates.

Accountant

One who keeps, audits, and inspects the financial records of individuals or businesses; one who analyzes these transactions and prepares reports that not only tell the present status of accounts receivable and payable but compare current reports with other years or periods of time.