Answer:
Before issuing the note
Current ratio
= Current assets
Current liabilities
= $502,000
$274,000
= 1.83: 1
After issuing the note
Current ratio
= $538,400
$274,000
= 1.96:1
Explanation:
Current ratio is the ratio of current assets to current liabilities. Before issuing the note, current assets amounted to $502,000 while current liabilities were $274,000. After issuing the note, current assets increased to $538,400 as a result of $39,400 received on note issue. This increases the current ratio from 1.83 to 1.96.
