Homework Answers
Answer is :- Revised current ratio will increase.
If the current ratio is 3:1 and Cash is used to pay outstanding accounts payable, then the revised current ration will increase.
It is because using of cash to pay outstanding accounts payable will result in decrease in both of current liabilities and current assets by the same amount while current assets are already 3 times of current liabilities hence decreasing same amount from both will increase the current ratio. For current ratio to be maintained there must be proportionate decrease in both but in actual the same amount will result in higher decrease in current liabilities proportionately than the decrease in current assets.
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Sold merchandise inventory that cost $55,000 for $130,000
cash.
10
Collected $22,000 cash on an account receivable.
15
Paid $24,500 cash to settle an account payable.
17
Wrote off a $5,000 bad...
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transactions (the company uses a perpetual inventory
system).
May
2
Purchased $55,000 of merchandise inventory on credit.
8
Sold merchandise inventory that cost $65,000 for $145,000
cash.
10
Collected $24,000 cash on an account receivable.
15
Paid $31,500 cash to settle an account payable.
17
Wrote off a $5,000 bad...
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