Question

1. Current ratio is measured by Current assets / Current liabilities. Assume current ratio is greater...

1.

Current ratio is measured by Current assets / Current liabilities. Assume current ratio is greater than 100% (or 1:1) and that cash balance remains positive at all times. State the effect the following event occurring on the reporting date would have on this ratio.

EVENT: Receipts from unearned revenue

2.

A company reports Non-controlling interests within the equity section of its consolidated statement of financial position. Which of the following statements is correct?
Group of answer choices

a. No single shareholder controls the company

b. Some of the company’s shareholders are shareholders of another company

c. The company holds less than 100% of the shares in a subsidiary

d. The company is a subsidiary of another company

e. The company holds less than 50% of the shares in a subsidiary

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Homework Answers

Answer #1

1. DECREASE IN CURRENT RATIO

Receipt of unearned revenue lead to decrease in current ratio.

Example: Existing Current Ratio = 1.5 (Current assets 150 / current liabilities 100)

Unearned revenue receipt = $50

New Current Ratio = Current Assets (150 + 50) / Current Liabilities (100 + 50) = $200 / $150 = 1.33

2. B. Some of the company’s shareholders are shareholders of another company

C. The company holds less than 100% of the shares in a subsidiary

Since a parent company is showing non controlling interest in balance sheet, it means there are other shareholders other than parent company shareholders and also it means that company is not holding 100% shares of subsidiary.

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