As of December 31, Year 1, Gant Corporation Had a Current

question 59

Multiple Choice

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant paid $250 for transportation cost on merchandise it had received. Which of the following statements is incorrect?

• A) Grove's current ratio will remain the same
• B) Grove's quick ratio will increase
• C) Grove's working capital will remain the same
• D) Grove's quick ratio will increase and its current ratio will remain the same.

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Definitions:

Binding Price Floor

A government or regulatory-imposed price control set above the equilibrium price, which prevents the market price from falling below that level.

Potential Sellers

Potential sellers are individuals or entities that may be willing to sell goods or services under the right conditions.

Price Floor

A government-imposed minimum price charged on a product, below which it cannot be sold to prevent market prices from falling too low.

Surplus

An excess of revenues over expenses in a budget, or an excess of goods or materials than what is needed.