Assume that the following transactions occurred during the year and that the

company has its total quick assets exceeding total current liabilities both before

and after each transaction described below, and that it has positive profits during

the year and a credit balance throughout the year in its retained earnings account.

Required: Answer each item with increase to, decrease to or no effect to. Explain briefly.

1. The effect to the current ratio and quick ratio by the payment of trade accounts

payable amounting to P64,500.

2. The effect to the current ratio and quick ratio of the purchase of raw materials

for P85,000 on account.

3. The effect to current ratio and quick ratio of the collection of current accounts

receivable of P29,000.

4. The effect to current ratio and quick ratio if obsolete inventory of P125,000 was

written off during the year.