A. All of the items listed in the other options will be affected in the manner in the choices. This makes this choice the correct answer. Please see the other choices for complete explanations of the individual items.
B. Because the first installment of the bonds is due later this year, this will increase the current liabilities, thereby decreasing the quick ratio. Because the bonds were issued in exchange for an office building, they did not receive any cash - meaning that there was no increase in current assets. While it is correct that the quick ratio does decrease, this answer is not correct because there is a better choice available.
C. Because the first installment of the bonds is due later this year, this will increase the current liabilities, thereby decreasing net working capital. Because the bonds were issued in exchange for an office building, they did not receive any cash - meaning that there was no increase in current assets. While it is correct that net working capital does decrease, this answer is not correct because there is a better choice available.
D. Because the first installment of the bonds is due later this year, this will increase the current liabilities, thereby decreasing the current ratio. Because the bonds were issued in exchange for an office building, they did not receive any cash - meaning that there was no increase in current assets. While it is correct that the current ratio does decrease, this answer is not correct because there is a better choice available.
