The current ratio of Hydro Company at December 31, 2018, calculated using the above data, was 3.13 and the company's working capital was \(\$ 170,000\). Which of the following would happen if the firm paid off \(\$ 20,000\) of its current liabilities on January 1, 2019?

a. Both the current ratio and working capital would decrease.

b. Both the current ratio and working capital would increase,

c. The current ratio would increase, but working capital would remain the same.

d. The current ratio would increase, but working capital would decrease.

Sales revenues for 2018 were \(\$ 800,000\), gross profit was \(\$ 320,000\), and net income was \(\$ 36,000\). The income tax rate was 40 percent. One year ago, accounts receivable (net) were \(\$ 76,000\), inventory was \(\$ 110,000\), total assets were \(\$ 460,000\), and stockholders' equity was \(\$ 260,000\). The bonds payable were outstanding all year and the 2018 interest expense was \(\$ 12,000\).

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Cash..... Accounts receivable (net). Inventory....... Plant and equipment (net) Total assets HYDRO COMPANY Balance Sheet December 31, 2018 $ 40,000 Current liabilities... $ 80,000 80,000 10% bonds payable 120,000 130,000 Common stock.... 200,000 ... 250,000 Retained earnings 100,000 $500,000 Total liabilities and stockholders' equity $500,000