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.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter6: Cash And Internal Control

Section: Chapter Questions

Problem 6.1DC

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