Indicate the effects of each of the following transactions on the following ratios. There are three
possible answers: increase (+), decrease (-), and no effect (0). Before each transaction occurs, the
current ratio is greater than 1 to 1, and the acid-test ratio is less than 1 to 1.
Current Ratio
Acid-test Ratio
Debt Ratio
ROS
ROA
EPS
(a) Sell merchandise for cash
(b) Buy inventory for cash
(c) Pay an account payable
(d) Borrow cash on a short-term loan
(e) Purchase plant assets for cash
(f) Issue long-term bonds payable
(g) Collect an account receivable
(h) Record accrued expenses payable
(i) Sell a plant asset for cash at a profit
(j) Sell a plant asset for cash at a loss
(k) Buy marketable securities for cash
(l) Declare and issue a stock dividend
(m) Purchase treasury stock for cash
Acquire land by issuing common stock
(o) Write off an uncollectible account receivable
possible answers: increase (+), decrease (-), and no effect (0). Before each transaction occurs, the
current ratio is greater than 1 to 1, and the acid-test ratio is less than 1 to 1.
Current Ratio
Acid-test Ratio
Debt Ratio
ROS
ROA
EPS
(a) Sell merchandise for cash
(b) Buy inventory for cash
(c) Pay an account payable
(d) Borrow cash on a short-term loan
(e) Purchase plant assets for cash
(f) Issue long-term bonds payable
(g) Collect an account receivable
(h) Record accrued expenses payable
(i) Sell a plant asset for cash at a profit
(j) Sell a plant asset for cash at a loss
(k) Buy marketable securities for cash
(l) Declare and issue a stock dividend
(m) Purchase treasury stock for cash
Acquire land by issuing common stock
(o) Write off an uncollectible account receivable