A company has current assets of $475,000 and current liabilities of $325,000. For each action on the right, indicate the effect on the current ratio (Increase, decrease, or no change). Analyze each action independently of the others. v The company uses cash to pay off a bank loan that is not due for A. No change. two years. B. Increase. v The company collects cash from outstanding accounts receivable. C. Decrease. v The company recognizes insurance expense from a prepaid insurance asset. v The company receives cash from issuing new shares of stock. v The company sells $9,500 of products on account. Using FIFO, the cost of goods sold for the products is $5,200. v The company acquires $12,000 of inventory on account.
A company has current assets of $475,000 and current liabilities of $325,000. For each action on the right, indicate the effect on the current ratio (Increase, decrease, or no change). Analyze each action independently of the others. v The company uses cash to pay off a bank loan that is not due for A. No change. two years. B. Increase. v The company collects cash from outstanding accounts receivable. C. Decrease. v The company recognizes insurance expense from a prepaid insurance asset. v The company receives cash from issuing new shares of stock. v The company sells $9,500 of products on account. Using FIFO, the cost of goods sold for the products is $5,200. v The company acquires $12,000 of inventory on account.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![A company has current assets of $475,000 and current liabilities of $325,000. For each action on the right, indicate the effect on the current ratio
(Increase, decrease, or no change).
Analyze each action independently of the others.
v The company uses cash to pay off a bank loan that is not due for A. No change.
two years.
B. Increase.
v The company collects cash from outstanding accounts receivable.
C. Decrease.
v The company recognizes insurance expense from a prepaid
insurance asset.
v The company receives cash from issuing new shares of stock.
v The company sells $9,500 of products on account. Using FIFO, the
cost of goods sold for the products is $5,200.
v The company acquires $12,000 of inventory on account.
A Moving to another question will save this response.
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Transcribed Image Text:A company has current assets of $475,000 and current liabilities of $325,000. For each action on the right, indicate the effect on the current ratio
(Increase, decrease, or no change).
Analyze each action independently of the others.
v The company uses cash to pay off a bank loan that is not due for A. No change.
two years.
B. Increase.
v The company collects cash from outstanding accounts receivable.
C. Decrease.
v The company recognizes insurance expense from a prepaid
insurance asset.
v The company receives cash from issuing new shares of stock.
v The company sells $9,500 of products on account. Using FIFO, the
cost of goods sold for the products is $5,200.
v The company acquires $12,000 of inventory on account.
A Moving to another question will save this response.
« < Question 4 of 28 >»
10:33 AM
arch
5/5/2021
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