Answer:
2
Explanation:
The current ratio is a measure of a company's ability to pay its current liabilities as they mature. It is a liquidity ratio. The formula for calculating the current ratio is current assets divide by current liabilities.
i.e., the current ratio = current assets/ current liabilities
For Mr. ribs restaurant.
current ratio = $36,000/ $18000
current ratio = 2
<u>Whether current ration will increase or decrease</u>
a).<u> paid cash $4500 for a new oven</u>
current assets will decrease by $4500. new ratio will 31000/18000
which is 1.75. The oven is not a current asset.
The current ration will decrease
b<u>). Received cash $4,500 as a contribution from an investor</u>
Increases cash but does not affect liabilities since stocks are not debts. new ration $40,500/ $18000= 2.25.
Increases the current ratio
c). <u>Borrowed $8,280 cash from a bank, issuing a note that must be repaid in three yea</u>rs.
Increased cash by $8250 and current liabilities by $2750($ 8,250/3)
New ratio = $44,250/20,750= 2.13.
Increases current ratio
d)<u>Purchased $700 of napkins, paper cups, and other disposable supplies on account</u>.
Reduces current assets (cash) by $700, disposable napkins, paper cups can not be classified as assets. The action does not affect liabilities since they were paid for in cash. new ratio =$ 35,300/ $18,000 = 1.96:
Reduces current ratio
