On account purchases of goods at a current ratio of 2 : 1

The correct answer is: A. Increase current ratio.

A current ratio of 2:1 means that a company has $2 in current assets for every $1 in current liabilities. When a company purchases goods on account, it increases its current assets (accounts payable) and its current liabilities (accounts payable). This increases the current ratio.

The gross profit percentage is a measure of a company’s profitability. It is calculated by dividing gross profit by net sales. When a company purchases goods on account, it does not affect its gross profit percentage.

Here is a more detailed explanation of each option:

• Option A: Increase current ratio. This is the correct answer. When a company purchases goods on account, it increases its current assets (accounts payable) and its current liabilities (accounts payable). This increases the current ratio.
• Option B: Decrease current ratio. This is incorrect. When a company purchases goods on account, it increases its current assets (accounts payable) and its current liabilities (accounts payable). This increases the current ratio.
• Option C: Increase gross profit percentage. This is incorrect. When a company purchases goods on account, it does not affect its gross profit percentage.
• Option D: Decrease gross profit percentage. This is incorrect. When a company purchases goods on account, it does not affect its gross profit percentage.