Southport Industries has current assets of $900,000 and a current ratio is 2.50.Assume that the company prepays rent for 9 months in the amount of $40,000.The current ratio after this transaction is closest to:
A)2.39.
B)2.61.
C)2.50.
D)2.81.

Question

Quizplus · Accepted Answer

Current ratio = Current assets ÷ Current liabilities
This transaction increases one asset (Prepaid Rent)and decreases another asset (Cash).There would be no change in current assets or the current ratio.

Southport Industries Has Current Assets of $900,000 and a Current