The Following Information Concerning the Current Assets and Current Liabilities

question 29

Multiple Choice

The following information concerning the current assets and current liabilities of
Mason Company at December 31, 2017, is presented below.
$\begin{array}{lrr}\text { Current Assets }\\\text { Cash } & & \$ 6,700 \\\text { Accounts Receivable } & \$ 7,900 & \\\text { Less Allowance } & \underline{ (70) }& 7,830 \\\text { Inventory } & & 2,270 \\\text { Prepaid expenses } & & \underline{500} \\\text { Total }& & \underline{\$17,300}\\\\\text { Current Liabilities }\\\text { Accounts payable } && \$ 9,000 \\\text { Wages payable } && 500 \\\text { Taxes payable } & &200 \\\text { Rent payable } & &1,600 \\\text { Notes payable } &&\underline{ 2,000} \\\text { Total } &&\underline{ \$ 13,300}\end{array}$
Based on this information, how would the current ratio be affected if Mason collects some accounts receivable and then uses $9,000 cash to pay off the accounts payable?

• A)The current ratio would increase from 1.30 to 1.93.
• B)The current ratio would increase from 0.74 to 4.02.
• C)The current ratio would decrease from 1.30 to 0.62.
• D)The current ratio would increase from 1.09 to 1.61.

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