Perhaps D should read: Current assets increase as D is correct as written. Done.JMF
If the company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank,then immediately after this transaction what is the expected impact on the components of the current ratio?
A) Current assets decrease and current liabilities increase by the same amount.
B) Current liabilities decrease.
C) Current assets and current liabilities decrease by the same amount.
D) Current assets increase.
Since we don't know the current ratio before this transaction,I don't think the correct answer should include the wording I have deleted.I changed all four answers.The feedback matches this approach.
Perhaps D should read: Current assets increase as D is correct as written.
Done.JMF
Since we don't know the current ratio before this transaction,I don't think the correct answer should include the wording I have deleted.I changed all four answers.The feedback matches this approach.

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities.The purchase of equipment for cash with the remainder on account is an asset source transaction;the current asset account Cash decreases by $30,000,the long-term asset account Property,plant,and equipment increases by $60,000,and the current liability account Notes Payable increases by $30,000.The current ratio is calculated by dividing current assets by current liabilities.Current assets decrease and current liabilities increase by $30,000 as a result of this transaction.

Perhaps D Should Read: Current Assets Increase as D Is