Basic Financial Accounting

Basic Financial Accounting 1. Current Ratio of the unshakable is 2:1. a. To pay a electric trustworthy obligation: (Improve) Given the give in situation, where the modern assets are 2 times the original liabilities, compensable off a on-going liability would definitely correct the catamenia ratio. Since the oc latest ratio is 2:1, let us assume that sure assets equal Rs.200 and trustworthy liabilities equal Rs.100. Let us further assume that Rs.20 in capital is apply to pay off Rs.20 in authentic liabilities. The new reliable ratio would be Rs.180/Rs.80 = 2.25:1, which is an increase everywhere the old current ratio of 2:1. Thereby, it is clear that this get around alone increase the current ratio. b. To sell a shoot car for bullion at a slight redness: (Improve) Selling a force back car (fixed asset), dismantle at a loss, leave alone non affect the current liability in any way. rather it involves cash inflow; the cash received from selling the motor car would add to the current asset which will in beat boost the current ratio. Therefore selling a motor car (even though sold at a slight loss) will better the current ratio. c. To borrow currency on an intimacy look promissory note: (Reduce) This will lead to a castigate in the current ratio.

short-term borrowings add to the current liability of the company which in turn will reduce the current ratio. d. To purchase stocks for cash: (No dislodge) purchase stocks(current asset) with cash(current asset) will not change the current ratio since cash is conve! rted into stock, which is just a trans social classation of one form of current asset into other form. e. To give an interest bearing promissory note to a creditor to whom money was owed on current account: (No change) This also will not change the current ratio. The money which was owed on current account is just issued as a promissory note. Since the promissory note is interest bearing, the interest payable on the current account is...If you want to bind a full essay, put in it on our website: BestEssayCheap.com

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