As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant purchased merchandise on account for $4,000. Which of the following statements is correct?
A. Gant's quick ratio will increase and its current ratio will decrease.
B. Gant's working capital will increase.
C. Gant's current ratio will decrease.
D. Gant's quick ratio will increase.
Answer: C
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