Question

Thank you for taking your time to answer these two questions. Question 4 and 5. 123456789. Thank you. QUESTION 4 Which of the following transactions would increase both Cash and Non-current liabilities? Ca. Payment from a customer b. A bank loan Cc. Purchasing goods on credit Cd. Payment to a supplier QUESTION 5 Listed in random order below are the balance sheet figures of a company as of 31 August 2020: . . Accounts receivable, $50,000 Accounts payable, $30,000 • Building, $90,000 • Share capital, $100,000 • Bank loan, $40,000 • Inventories, $10,000 • Cash, $20,000 • Intangible assets, $30,000 • Equipment, $40,000 • Retained earnings, $40,000 The company's current ratio is closest to: a. 4.00 b.5.00 c. 2.67 d. 1.14 e. 2.33

Answer 1

Question 4)

The correct answer is b) A bank loan.

Supporting explanations:

When a bank loan is taken, cash comes into the business so cash increases and a new non-current liability is created in the form of Bank Loan so the non-current liabilities will also increase because it is liability that needs to be paid in the future.

Therefore, the only transaction from the given list increases both cash and non-current liabilities is the Bank Loan.

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Question 5)

In this question, the bank loan is not mentioned whether is a current liability (needs to pay within one year) or a non-current liability (needs to pay more than 12 months)

But generally. bank loans are treated as non-current liability so it is treated as non current liability.

The correct answer is c) 2.67

Supporting calculations:

Accounts receivable	$50,000
Inventories	$10,000
Cash	$20,000
Total Current Assets (a)	$80,000
Accounts Payable	$30,000
Total Current Liabilities (b)	$30,000
Current Ratio (a/b)	2.67

Therefore, current ratio is 2.67.