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A company has current assets of $90,000 and its current ratio is 2.5. Assume that the...

A company has current assets of $90,000 and its current ratio is 2.5. Assume that the company prepays rent for 9 months in the amount of $4,000. The current ratio after this transaction is closest to: A. 2.39 B. 2.69 C. 2.50 D. 2.81

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Answer #1

The current assets in the current ratio includes prepaid expenses. When prepaid expenses are paid cash decreases in the balance of prepaid expenses increases but the total of the current assets will remain the same. There will be no change in the current ratio because of payment of prepaid expenses.

Current ratio = 2.50

Option C.

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