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1. Subtract current liabilities from current assets to calculate working capital. Divide current assets by current liabilities to calculate the current ratio. Divide quick assets by current liabilities to calculate the quick ratio. Quick assets are cash, temporary investments, and receivables.2. Set up T accounts and calculate the working capital, current ratio and the quick ratio after each transaction.
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Effect of Transactions on
Current Position Analysis
Data pertaining to the current position of Newlan Company are as follows:
Instructions:
1. Compute (a) theworking capital, (b) thecurrent ratio, and (c) thequick ratio. Round the current ratio and the quick ratio to one decimal place.

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 above. Format working capital as whole dollars. Round the current ratio and the quick ratio to one decimal place.
Transaction
Working Capital
Current Ratio
Quick Ratio
a.
Sold temporary investments at no gain or loss, $50,000.
$
b.
Paid accounts payable, $40,000.
$
c.
Purchased goods on account, $75,000.
$
d.