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    sherlita_thompk's Avatar
    sherlita_thompk Posts: 5, Reputation: 1
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    #1

    Feb 4, 2009, 12:31 PM
    Current Ratio
    Grant Film Productions wishes eo expand and has borrowed $100,000. As a condition for making this loan, the bank requires that the store maintained a current ration of at least 1.50. Business has been good bu t not great. Expansion costs have brought the current ratio down to 1.40 at December 15. Rita Grant, owner of the business, is considering what might happen if she reports a current ratio of 1.40 to the bank. Once course of action for Grant is to record in December $10,000 of revenue that the business will earn in January of next year. The contract for this job has been signed.

    Journalize the revenue transaction, and indicate how recording revenue in December would affect the current ratio.
    hoightoider's Avatar
    hoightoider Posts: 41, Reputation: 2
    Junior Member
    		  
    #2

    Feb 9, 2009, 09:21 PM

    If the business is on an accrual accounting system, it can debit A/R and credit sales. This will increase current assets - without knowing what current liabilities are, I don't know what the new ratio will be.
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