{"id":44240,"date":"2024-04-15T21:40:56","date_gmt":"2024-04-15T21:40:56","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=44240"},"modified":"2024-04-15T21:40:56","modified_gmt":"2024-04-15T21:40:56","slug":"on-account-purchases-of-goods-at-a-current-ratio-of-2-1","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/on-account-purchases-of-goods-at-a-current-ratio-of-2-1\/","title":{"rendered":"On account purchases of goods at a current ratio of 2 : 1"},"content":{"rendered":"<p>[amp_mcq option1=&#8221;Increase current ratio&#8221; option2=&#8221;Decrease current ratio&#8221; option3=&#8221;Increase gross profit percentage&#8221; option4=&#8221;Decrease gross profit percentage&#8221; correct=&#8221;option1&#8243;]<!--more--><\/p>\n<p>The correct answer is: A. Increase current ratio.<\/p>\n<p>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.<\/p>\n<p>The gross profit percentage is a measure of a company&#8217;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.<\/p>\n<p>Here is a more detailed explanation of each option:<\/p>\n<ul>\n<li>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.<\/li>\n<li>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.<\/li>\n<li>Option C: Increase gross profit percentage. This is incorrect. When a company purchases goods on account, it does not affect its gross profit percentage.<\/li>\n<li>Option D: Decrease gross profit percentage. This is incorrect. When a company purchases goods on account, it does not affect its gross profit percentage.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>[amp_mcq option1=&#8221;Increase current ratio&#8221; option2=&#8221;Decrease current ratio&#8221; option3=&#8221;Increase gross profit percentage&#8221; option4=&#8221;Decrease gross profit percentage&#8221; correct=&#8221;option1&#8243;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[85],"tags":[],"class_list":["post-44240","post","type-post","status-publish","format-standard","hentry","category-accounting","no-featured-image-padding"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v22.2 (Yoast SEO v23.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>On account purchases of goods at a current ratio of 2 : 1<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/exam.pscnotes.com\/mcq\/on-account-purchases-of-goods-at-a-current-ratio-of-2-1\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"On account purchases of goods at a current ratio of 2 : 1\" \/>\n<meta property=\"og:description\" content=\"[amp_mcq option1=&#8221;Increase current ratio&#8221; 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