Answer:
Current Ratio - Transaction 1 = 1.6666 rounded off to 1.67
Current Ratio - Transaction 2 = 1.6388 rounded off to 1.64
Explanation:
The current ratio is a measure of liquidity which measures the amount of current assets a business has to pay off each $1 of current liability. It is calculated as follows,
Current Ratio = Current Assets / Current Liabilities
We know the initial current ratio and current assets. The initial current liabilities will be,
1.8 = 54000 / Current Liabilities
Current Liabilities = 54000 / 1.8
Current Liabilities = $30000
Transaction 1
The result of transaction 1 will be that the current assets will increase by $6000 as inventory increases and the current liabilities will also increase by $6000 as accounts payable are increasing. The new current ratio will be,
Current Ratio - Transaction 1 = (54000 + 6000) / (30000 + 6000)
Current Ratio - Transaction 1 = 1.6666 rounded off to 1.67
Transaction 2
The result of transaction 2 will be that the current assets will decrease by $1000 as payment for truck which is a fixed asset is made partly by cash and the current liabilities will not increase as the note signed for the remaining payment of the truck is due after 2 years thus it is a non current liability. The new current ratio will be,
Current Ratio - Transaction 2 = (54000 + 6000 -1000) / (30000 + 6000)
Current Ratio - Transaction 2 = 1.6388 rounded off to 1.64
