Indicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0. Federal income tax due for the previous year is paid.
Indicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0.
Federal income tax due for the previous year is paid.
Federal income tax due is paid:
Liability due is paid which results cash outflow. Here, liability is going reduce and asset is going to reduce. So, there will be change in current ratio. Current assets will decrease, as cash is going out.
Net income will not change as it is not affecting Income statement.
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