The Bombay Company, Inc., sold a line of home furnishings that included furniture, wall decor, and decorative accessories. Bombay operated through a network of retail locations throughout the United States and Canada, as well as through its direct-to-customer operations and international licensing arrangements. The company was forced to file for bankruptcy. In its last financial statement prior to bankruptcy, Bombay reported current assets of $161,604,000 and current liabilities of $113,909,000.
Required:
Determine the impact of the following independent transactions on the current ratio for Bombay:
1. Sold long-term assets for cash.
2. Accrued severance pay and benefits for employees who were terminated.
3. Wrote down the carrying value of certain inventory items that were deemed to be obsolete.
4. Acquired new inventory; supplier was not willing to provide normal credit terms, so an 18-month interest-bearing note was signed.