If Marshall Toys has a current ratio of 3.2 and working capital of $2,200,000, which of the following will cause both the current ratio and working capital to decrease?
A) Paid accounts payable in the amount of $30,000
B) Recorded unpaid salaries in the amount of $80,000
C) Borrowed $100,000 from a bank to be repaid in 90-days
D) Purchased $15,000 of inventory on credit

Question

Quizplus · Accepted Answer

Recording unpaid salaries increases current liabilities without affecting current assets, thus decreasing both the current ratio and working capital.

If Marshall Toys Has a Current Ratio of 3