Question

Question 4

1. Table 9-7
   Given below are the balance sheet at December 31, 20X9 and income statement for the year ended, December 31, 20X9 for Hortense Company:
   
   Hortense Company
   Balance Sheet
   December 31, 20X9
   
   Current Assets: Current Liabilities:
   Cash $ 6,000 Accounts Payable $ 3,000
   Accounts Receivable 4,000 Wages Payable 2,000
   Inventory 14,000 Total Current Liabilities $ 5,000
   Total Current Assets 24,000 Long-term Bond Payable 24,000
   Total Liabilities $29,000
   Long-term Assets: Stockholders' Equity:
   Fixed Assets $60,000 Common Stock $ 12,000
   Accumulated Depr. (17,000) Retained Earnings 26,000
   Net Fixed Assets 43,000 Total Stockholders' Equity 38,000
   Total Assets $67,000 Total Liabilities & Equity $67,000
   
   Hortense Company
   Income Statement
   For The Year Ended December 31, 20X9
   
   Sales $240,000
   Cost of Goods Sold 103,000
   Gross Profit $137,000
   Operating Expenses 82,000
   Operating Income $ 55,000
   Interest Expense 2,000
   Income before Taxes $ 53,000
   Income Tax Expense 27,000
   Net Income $ 26,000
   
   
   Referring to Table 9-7, the long-term-debt-to-total-capital ratio for Hortense Company at December 31, 20X9, is

   		38.71%.
   		200.00%.
   		35.82%.
   		92.31%.
   		63.16%.

Answer 1

Long-term-debt-to-total-capital ratio

= Long-term debt / Total capital

= Long-term bonds payable / (Long-term bonds payable + Total stockholders' equity)

= $24,000 / ($24,000 + $38,000)

= 38.71%

Therefore, the long-term-debt-to-total-capital ratio for Hortense Company at December 31, 20X9, is 38.71%.