You have learned how to analyze a transaction $($event$).$ Each transaction affects financial statement items and thus financial ratios. Since financial ratios affect how a firm does its business, it is important to understand how an event affects ratios.

Apple paid $$12,500$ of accounts payable in cash. What would be the effect on the current ratio? Before the transaction, current assets were $135,000$ and current liabilities were $105,150.$ Journalize the transaction and calculate current ratio before the transaction and current ratio after the transaction.