As of December 31, 2013, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, 2014, Gant issued common stock for $10,000 cash. Which of the following statement is true?

Question

Quizplus · Accepted Answer

When Gant issues common stock for $10,000 cash, there is an increase in the total assets and equity of the company, with no change in liabilities. As a result, the current ratio and quick ratio will increase, indicating an improvement in the company's liquidity position. Moreover, the working capital will also increase as there is an increase in current assets. Therefore, options A, C, and D are incorrect.

As of December 31, 2013, Gant Corporation Had a Current