A Indicate the Effect of a Sale of Merchandise on Account

Essay

a. Indicate the effect of a sale of merchandise on account (on credit) on each of the following items. Assume the selling price exceeds the cost of the inventory. Use "Increase," "Decrease," or "No effect" to express your answer for each, and place your answers in the spaces provided.
$\begin{array}{|l|l|}\hline \text { Current ratio } &\quad\quad\quad\quad \\\hline \text { Quick ratio } & \\\hline \text { Inventory turnover } & \\\hline \text { Asset turnover } & \\\hline\end{array}$
b. Indicate the effect of a payment of an account payable on each of the following items. Assume that the first two ratios exceeded 1.0 before the transaction. Use "Increase," "Decrease," or "No effect" to express your answer for each, and place your answers in the spaces provided.
$\begin{array}{|l|l|}\hline \text { Current ratio } &\quad\quad\quad\quad \\\hline \text { Quick ratio } & \\\hline \text { Return on equity } & \\\hline \text { Receivable turnover } & \\\hline\end{array}$