Indicate whether each of the following transactions and economic events will increase, decrease, or have no effect on the current ratio, quick ratio, accounts receivable turnover ratio, and the average collection period of accounts receivable. Assume that the current and quick ratios are greater than 1.0 before each of the items is considered and the company uses accrual accounting.
1. Recording the bad debt expense.
2. Collection of accounts receivable.
3. Purchase of inventory on credit.
4. A new short-term bank loan.
5. Reclassification of a long-term receivable as current (because it will come due within 12 months).
6. Recording the accrual for discounts for prompt payment

  • CreatedFebruary 26, 2015
  • Files Included
Post your question