Barrett Company Received Cash of $5,000,000 by Issuing 20-Year Bonds

question 29

Multiple Choice

Barrett Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of the this transaction, the company's current ratio will:

• A)Remain the same.
• B)Decrease.
• C)Increase.
• D)Cannot be determineD.The transaction will increase current assets (cash) and increase long-term liabilities (bonds payable). The current ratio is current assets/current liabilities. The ratio will not be affected by the increase in long-term liabilities, but the increase in current assets will cause the ratio to increase.

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Definitions:

Itemization

A method of pricing a funeral in which every item of service, facility, and transportation is listed with its related cost. This is the method mandated by the Federal Trade Commission.

Funeral Costs

The expenses associated with conducting a funeral service, including but not limited to, the casket, service fees, burial or cremation, and other associated costs.

Federal Trade Commission

A United States government agency established to prevent anticompetitive business practices, consumer deception, and unfair methods of competition.

Embalming

The process of preserving a body from decay, originally practiced by the Egyptians for preservation of bodies for the afterlife.