What is the effect of a purchase of inventory on account on the current ratio and on working capital,respectively? (Assume a current ratio greater than one prior to this transaction. ) $\begin{array}{lll}&\text { Current ratio}&\text { Working capital }\
\text { A) } & \text { decrease } & \text { no effect } \
\text { B) } & \text { no effect } & \text { decrease } \
\text { C) } & \text { decrease } & \text { decrease } \
\text { D) } & \text { no effect } & \text { no effect }
\end{array}$
A)Option A
B)Option B
C)Option C
D)Option D

Question

Quizplus · Accepted Answer

The purchase of inventory on account increases current liabilities, which decreases the current ratio. However, both current assets and current liabilities increase by the same amount, leaving working capital unchanged.

What Is the Effect of a Purchase of Inventory on Account