C is corrent. The issuance of a note for cash would increase both the numerator (current assets) and the denominator (current liabilities) an equal amount, thereby decreasing the current ratio. For example, assume the current ratio is 2/1. If the company issues a note that increases the current assets to 2.5 and the current liabilities to 1.5, the effect would be a decrease of the current ratio.
A is incorrect. A 5% stock dividend on a marketable security will not affect the numerator (current assets) or denominator (current liabilities). Receipt of stock dividends changes the cost per share of stock and not the overall cost of the investment in marketable securities.
B is incorrect. Selling merchandise for more than cost would result in an increase in current assets with no change in current liabilities; thus, the current ratio would increase.
D is incorrect. The payment of an account payable would reduce both the numerator (current assets) and the denominator (current liabilities) an equal amount, thereby increasing the current ratio. For example, assume the current ratio is 2/1. If an account payable is paid, decreasing the current assets to 1.5 and decreasing the current liabilities to .5, the effect would be an increase of the current ratio.
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