Question

A company with $60,000 in current assets and $35,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

Answer 1

Increase and remain the same respectively

Step-by-step explanation:

Given the above information, we know that current ratio is computed as;

Current ratio = Current assets ÷ Current liabilities

Current ratio = $60,000 ÷ $34,000

Current ratio = 1: 1.76

Working capital is computed as;

= Current asset - Current liabilities

= $60,000 - $34,000

= $26,000

As a result of the above, the current ratio increased because of the reduction in the current liabilities value while the working capital remains the same.