A Company Has a Current Ratio of 2 to 1

question 33

Multiple Choice

A company has a current ratio of 2 to 1.This ratio will decrease if the company:

• A) borrows cash on a six-month note.
• B) sells merchandise for more than cost and records the sale using the perpetual inventory method.
• C) receives a 5 percent stock dividend on one of its marketable securities.
• D) pays a large account payable which had been a current liability.
• E) None of these choices are correct.

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Definitions:

Office Furniture

Items and fixtures used in an office setting for working and storage purposes, including desks, chairs, and file cabinets.

Straight-Line Method

A way of calculating depreciation by evenly spreading the cost of an asset over its useful life.

Resale Value

The projected value at which an asset can be disposed of after its life of usability has ended.

Office Furniture

Items and fixtures used in an office setting to support various work activities and tasks, such as desks, chairs, and file cabinets.