ACCT-202 Chapter Notes - Chapter 12: Current Liability, Quick Ratio, Revolving Credit
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Measuring Ability to Pay Liabilities
LeBronson's Companies Balance Sheet May 31, 2018 and 2017LeBronson's companies has 10,000 common shares outstanding during2018
Assets | Liabilities | ||||
2018 | 2017 | 2018 | 2017 | ||
Cash | 2,400 | 900.00 | Total Current Liabilties | 28,000 | 13,200 |
Short-Term Investments | 28,000 | 9,000 | Long-Term Liabilities | 13,900 | 10,300 |
Accounts Receivable | 7,500 | 5,200 | Total Liabilities | 41,900 | 23,500 |
Merchandise Inventory | 6,900 | 8,600 | Stockholder's Equity | ||
Other Current Assets | 8,000 | 1,500 | Common Stock | 11,000 | 11,000 |
Total Current Assets | 52,800 | 25,200 | Retained Earnings | 29,900 | 19,700 |
All Other Assets | 30,000 | 29,000 | Total Equity | 40,900 | 30,700 |
Total Assets | 82,800 | 54,200 | Total Liabilities and Equity | 82,800 | 54,200 |
Calculating these objectives
A. Calculate the debt ratio and the debt to equity ratio at May31, 2018, for LeBronson's Companies.
B. Is LeBronson's ability to pay its liabilities good or bad?Explain your decision or findings.
Fridley Manufacturing's accounting records reveal the following account balances after adjusting entries are made on December 31, 2018:
Accounts payable | $ 62,500 | |
Bonds payable (9.4%, due in 2025) | 800,000 | |
Lease liability* | 41,500 | |
Bonds payable (8.7%, due in 2021) | 50,000 | |
Deferred tax liability* | 133,400 | |
Discount on bonds payable (9.4%, due in 2025) | 12,600 | |
Income tax payable | 26,900 | |
Interest payable | 38,700 | |
Installment note payable (8% equal installments due 2019 to 2022) | 120,000 | |
Notes payable (7.8%, due in 2023) | 400,000 | |
Premium on notes payable (7.8%, due in 2023) | 6,100 | |
Zero coupon note payable, $50,000 face amount, due in 2024 (net of discount) | 31,900 |
* Long-term liability
Required:
Prepare the current liabilities and long-term debt portions of Fridley's statement of financial position at December 31, 2018. Provide a separate line item for each issue (do not combine separate bonds or notes payable), but some items may need to be split into more than one item.
Fridley Manufacturing | ||
Liabilities Section of the Statement of Financial Position | ||
December 31, 2018 | ||
Liabilities | ||
Current liabilities: | ||
Accounts payable | $ | |
Interest payable | ||
Income tax payable | ||
Current portion of installment note | ||
Total current liabilities | $ | |
Long-term liabilities: | ||
Bonds payable: | ||
Bonds payable (8.7%, due in 2021) | ||
Bonds payable (9.4%, due in 2025) | $ | |
Less: Discount on bonds payable | ||
Notes payable: | ||
Notes payable (7.8%, due in 2023) | $ | |
Add: Premium on notes payable | ||
Installment note payable (8%) | ||
Note payable (4%, due in 2024) | $ | |
Less: Discount on note payable | ||
Other long-term liabilities: | ||
Lease liability | ||
Deferred tax liability | ||
Total liabilities | $ |