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A company currently has the following accounts: Cash: $7,000 Accounts Receivable (net): $11,000 Short-Term Investment: $3,000 Inventory: $3,000 Current Liabilities: $5,000 The company has just learned that a $4,000 accounts receivable will not be collectible. How will this change impact the current ratio? It will decrease from 4.8 to 4.0. It will increase from 4.2 to 5.0. It will decrease from 4.2 to 3.4. It will increase from 4.8 to 5.6.

A company currently has the following accounts: Cash: $7,000 Accounts Receivable (net): $11,000 Short-Term Investment: $3,000 Inventory: $3,000 Current Liabilities: $5,000 The company has just learned that a $4,000 accounts receivable will not be collectible. How will this change impact the current ratio? It will decrease from 4.8 to 4.0. It will increase from 4.2 to 5.0. It will decrease from 4.2 to 3.4. It will increase from 4.8 to 5.6.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A company currently has the following accounts:

  • Cash: $7,000
  • Accounts Receivable (net): $11,000
  • Short-Term Investment: $3,000
  • Inventory: $3,000
  • Current Liabilities: $5,000

The company has just learned that a $4,000 accounts receivable will not be collectible.

How will this change impact the current ratio?

  • It will decrease from 4.8 to 4.0.
  • It will increase from 4.2 to 5.0.
  • It will decrease from 4.2 to 3.4.
  • It will increase from 4.8 to 5.6.
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