1.One common problem with the current ratio is that it is susceptible to "window dressing". If prior to the end of the accounting period Streetwise Company has a current ratio of 1.5 and management wishes to boost its current ratio it may decide to

a.

Pay off accounts payable prior to year end.

b.

purchase more inventory on account.

c.

purchase short-term investments with cash.

d.

purchase more inventory with cash.

I think is A but I found that current asset and current liability will all change (decrease:Dr Account payable Cr cash).

2.Schwerin Corporation reports the following on its 2005 financial statements.

From statement of cash flows: Cash proceeds from sale of equipment Cash outow for purchase of equipment Depreciation Gain from sale of equipment 2004 205 $100 million 170 million 50 million 40 million