Use the Following Information for Questions

question 119

Multiple Choice

Use the following information for questions.
Anson Corporation had $325,000 in current assets and $145,000 in current liabilities before borrowing $100,000 from the bank for a 6-month period.
-What effect did the borrowing transaction have on Anson's current ratio?

• A) The ratio remained unchanged.
• B) The change in the current ratio cannot be determined.
• C) The ratio decreased.
• D) The ratio increased.

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Definitions:

First-In, First-Out

An inventory valuation method that assumes goods or materials purchased first are sold or used first.

Conversion Costs

Costs incurred to convert raw materials into finished products, including direct labor costs and manufacturing overhead.

FIFO Method

An inventory valuation method that assumes the first items placed into inventory are the first sold; stands for "First In, First Out."

Direct Materials Cost

The cost of raw materials used in manufacturing a product that are directly traced to that product.