Question

BSO, Inc, has current assets of $1,000,000 and current liabilities of $500,000, resulting in a current ratio of 2.0.Calculate the current ratio and determine whether it will increase, decrease, or remain the same.a. Purchased $20,000 of supplies on credit.b. Paid Accounts Payable in the amount of $50,000.c. Recorded $100,000 of cash contributed by a stockholder.d. Borrowed $250,000 from a local bank, to be repaid in 90 days.

Answer 1

1.96 Decreased; 2.06 Increased; 2.28 Increased; 1.83 Decreased

Step-by-step explanation:

Let's present it in a table

Current Assets / Current Liabilities = Current Ratio

Beg. 1,000,000 / 500,000 = 2

In A. Current Assets increased and Current Liabilities Increased.

a. 1,020,000 / 520,000 = 1.96 Decreased

In B. Current Assets decreased and Current Liabilities decreased.

b. 970,000 / 470,000 = 2.06 Increased

In C. Current Assets increased and Current Liabilities remained the same.

c. 1,070,000 / 470,000 = 2.28 Increased

In D. Current Assets increased and Current Liabilities Increased.

d. 1,3720,000 / 720,000 = 1.83 Decreased

Current ratio moves when a current asset or current liability moves.