Assume the current ratio is 3 to 1.Estimating the warranties expense on the period's sales would cause the current ratio to
A)increase.
B)decrease.
C)be unchanged since the effects offset one another.
D)be unchanged since it has no effect on any current accounts.

Question

Quizplus · Accepted Answer

Estimating the warranties expense on the period's sales would decrease the current ratio because it would increase the current liabilities without affecting the current assets. This would result in a lower current ratio, as current liabilities would increase more than current assets.

Assume the Current Ratio Is 3 to 1