Edward Allen Interiors Inc. is a leading manufacturer and retailer of home furnishings in the United States and abroad. The following is adapted from Edward Allens September 30, 2016, trial balance. (The amounts shown represent millions of dollars.)

Accounts Payable	$	143
Accounts Receivable		32
Cash		144
Common Stock		34
Equipment		385
Inventory		180
Notes Payable (long-term)		245
Notes Payable (short-term)		1
Prepaid Rent		36
Retained Earnings		397
Salaries and Wages Payable		42
Software		85

Assume that the following events occurred in the following quarter.

1. Paid $45 cash for additional inventory.
2. Issued additional shares of common stock for $25 in cash.
3. Purchased equipment for $230; paid $110 in cash and signed a note to pay the remaining $120 in two years.
4. Signed a short-term note to borrow $11 cash.
5. Conducted negotiations to purchase a sawmill, which is expected to cost $42.

rev: 02_21_2018_QC_CS-119136

1. 7-a. Use your response to part 6 to calculate Edward Allens current ratio after the transactions listed in (a)(e). (Round your answer to 2 decimal places.)

1. 7-b. Based on this calculation and the calculation in part 1, indicate whether the above transactions increase or decrease the companys ability to pay current liabilities.

multiple choice

• Increase

• Decrease