A Indicate the Effect of a Sale of Merchandise on Account

question 48

Essay

a. Indicate the effect of a sale of merchandise on account (on credit) on each of the following items. Assume the selling price exceeds the cost of the inventory. Use "Increase," "Decrease," or "No effect" to express your answer for each, and place your answers in the spaces provided.
$$\begin{array} { | l | l | } \hline \text { Current ratio } & \quad\quad\quad\quad\quad\\\hline \text { Quick ratio } & \\\hline \text { Arvertay turnover} & \\\hline \text { Arset turnover } & \\\hline\end{array}$$
b. Indicate the effect of a payment of an account payable on each of the following items. Assume that the first two ratios exceeded 1.0 before the transaction. Use "Increase," "Decrease," or "No effect" to express your answer for each, and place your answers in the spaces provided.
$\begin{array}{|l|l|}\hline \text { Curent ratio } &\quad\quad\quad\quad \\\hline \text { Quick ratio } & \\\hline \text { Return on equity } & \\\hline \text { Receivable turnover } & \\\hline\end{array}$

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Definitions:

Production Supervisor's Salary

The compensation paid to the individual responsible for overseeing and managing the daily operations of the production floor.

Factory Overhead

All indirect costs associated with the manufacturing process, including utilities, maintenance, and salaries of non-direct labor.

Product Cost

The total costs incurred to acquire or produce the goods sold by a company, including direct materials, direct labor, and manufacturing overhead.

Office Equipment

Items and machinery used in an office for the purpose of carrying out business activities, like computers, printers, and furniture.