Question

0 Data Table Credit Griffith Corporation Adjusted Trial Balance December 31, 2018 Account Debit Cash $ 16,000 Accounts receivable 18,600 Supplies 2,100 Prepaid rent 1,800 Equipment 37,400 Accumulated depreciation- equipment Accounts payable Interest payable Unearned service revenue Income tax payable Note payable Common stock Retained earnings Dividends 10,000 Service revenue Depreciation expense- equipment 2,000 Salary expense 40,700 Rent expense 10,800 Interest expense 2,900 Insurance expense 4,200 Supplies expense 2,200 Income tax expense 7,300 Total $ 156,000 $ 4,600 9,300 400 600 2,900 18,100 19,000 4,000 97,100 156,000 Print Print Done Done

Answer 1

Requirement 1:

Griffith Corporation
Income Statement
For the year ended Dec 31,2018
Revenues:
Service revenue		$ 97,100
Expense:
Depreciation expense-equipment	$    2,000
Salary expense	$ 40,700
Rent expense	$ 10,800
Interest expense	$    2,900
Insurance expense	$    4,200
Supplies expense	$    2,200
Income tax expense	$    7,300
Total Expenses		$ 70,100
Net income		$ 27,000

Griffith Corporation
Statement of retained earnings
For the year ended Dec 31,2018
Retained earnings, Jan 1,2018	$4,000
Add: Net income	$27,000
Subtotal	$31,000
Less: Dividends	$ (10,000)
Retained earnings, Dec 31,2018	$21,000

Griffith Corporation
Balance Sheet
December 31,2018
Assets			Liabilities
Cash		$ 16,000	Accounts payable	$    9,300
Accounts receivable		$ 18,600	Interest payable	$        400
Supplies		$    2,100	Unearned service revenue	$        600
Prepaid rent		$    1,800	Income tax payable	$    2,900
Equipment	$ 37,400		Note payable	$ 18,100
Accumulated depreciation-equipment	$ (4,600)	$ 32,800	Total liabilities	$ 31,300
			Stockholders' Equity
			Common stock	$ 19,000
			Retained earnings	$ 21,000
			Total stockholders' equity	$ 40,000
Total Assets		$ 71,300	Total liabilities and Stockholders' Equity	$ 71,300

Requirement 2:

Total liabilities	/	Total Assets	=	Debt ratio
$31,300	/	$71,300	=	0.44

Griffith's lenders that the company maintain a debt ratio no higher than 0.50.

Griffith is Satisfied with this debt restriction at December 31,2018 as it is no higher than 0.50