Author Question: Ima Knerd is happy with the progress of her computer repair business. She has made a profit in each ... (Read 41 times)

K@ · **on:** Jul 5, 2018

Ima Knerd is happy with the progress of her computer repair business. She has made a profit in each of the past six months. However, her accountant is worried because the current ratio for the business is 0.80. Explain to Ima why this is a concern.

What will be an ideal response?

Question 2

The account that should be credited for the total income tax withheld from employee's earnings is
a. FICA Tax Payable.
b. FICA Tax Expense.
c. Employee Income Tax Payable.
d. Employee Income Tax Expense.

Carliemb17 · **Reply #1 on:** Jul 5, 2018

Answer to Question 1

A current ratio of 0.80 means that for every 1 of current liabilities, Ima's business has only 0.80 available in current assets. She has borrowed too much money and will not be able to pay the debts with her current assets. She must rely on current cash flows to cover her debt payments. Ima should concentrate on paying her debts. At the same time, she should try to increase the amount of her current assets, particularly cash.

Answer to Question 2

c