AICPA Exam CPA-Business Topic 3 Question 47 Discussion

Choice 'a' is correct. This does not change the current ratio because the reduction of cash is offset by an increase in accounts receivable.

Choice 'b' is incorrect. A cash dividend increases current liabilities without increasing current assets. Although current assets remain unchanged (until the payment happens), the current ratio will change.

Choice 'c' is incorrect. Cash is reduced and current liabilities are reduceD. Total current assets will change (they will be reduced).

Choice 'd' is incorrect. The payment of cash reduces current assets. Long-term assets are increased, as well as long-term and short-term liabilities. The current ratio is reduced.