Assume that during the first quarter of the following year, $20$X$2,$ Bellwood completed the c$.$ Expenses usually

the current ratio. $($Note: Depreciation is an exception

to this rule.$)$

d$.$ Expenses usually

the debt ratio.

e$.$ If a company's current ratio is greater than $1\mathrm{.}0,$ as it is for Bellwood, paying off a

current liability will always

the current ratio.

f$.$ Borrowing money on long$-$term debt will always

the current ratio and

the debt ratio. e$.$ Accrued general expense of $$0\mathrm{.}7$ million. Credit General Expense Payable, a current

liability.

f$.$ Purchased equipment for $$4\mathrm{.}4$ million, paying cash of $$1\mathrm{.}7$ million, and signing a

long$-$term note payable for $$2\mathrm{.}7$ million.

g$.$ Recorded depreciation expense of $$0\mathrm{.}9$ million.

Requirements

Calculate Bellwood's current ratio and debt ratio at December $31,20$X$1.$ Round to two

decimal places.

Consider each transaction separately. Calculate Bellwood's current ratio and debt ratio

after each transaction during $20$X$2-$that is$,$ seven times. Round ratios to two decimal

places.

Complete the following statements with either "increase" or "decrease":

a$.$ Revenues usually

the current ratio.

b$.$ Revenues usually

the debt ratio.

following transactions:

a$.$ Earned revenue, $$2\mathrm{.}6$ million, on account.

b$.$ Borrowed $$5\mathrm{.}0$ million in long$-$term debt.

c$.$ Paid half of the current liabilities.

d$.$ Paid selling expense of $$1\mathrm{.}0$ million.