(CMA adapted, Dec 93 #17) Norton Inc.has a 2 to 1 current ratio.This ratio would increase to more than 2 to 1 if
A)a previously declared stock dividend were distributed.
B)the company wrote off an uncollectible receivable.
C)the company sold merchandise on open account that earned a normal gross margin.
D)the company purchased inventory on open account.
E)none of the above.

Question

Quizplus · Accepted Answer

Selling merchandise on open account increases current assets (accounts receivable) without affecting current liabilities, thus increasing the current ratio.

(CMA Adapted, Dec 93 #17) Norton Inc