Barrett Company Received Cash of $5,000,000 by Issuing 20-Year Bonds

Multiple Choice

Barrett Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of the this transaction, the company's current ratio will:

A) Remain the same.
B) Decrease.
C) Increase.
D) Cannot be determineD.The transaction will increase current assets (cash) and increase long-term liabilities (bonds payable) . The current ratio is current assets/current liabilities. The ratio will not be affected by the increase in long-term liabilities, but the increase in current assets will cause the ratio to increase.