Whispering Winds had total debt of $507,500 and $760,350 as at December 31, 2020, and December...
Whispering Winds had total debt of $507,500 and $760,350 as at December 31, 2020, and December 31, 2019, respectively, of which $105,000 and $150,000 was current. In addition, the company had total assets of $875,000 and $685,000 as at December 31, 2020, and December 31, 2019, respectively, of which $130,000 and $165,000 was current. Evaluate the company’s debt-paying ability in 2020 and 2019.
| 2020 | 2019 | |||
|---|---|---|---|---|
|
Debt-paying ability by calculating the debt to total assets ratio: (Round answers to 0 decimal places, e.g. 500%.) |
||||
|
Debt-paying ability by calculating current ratio: (Round answers to 2 decimal places, e.g. 45.50.) |
Homework Answers
Debt to Assets Ratio
=Total liabilities/Total Assets.
December 2019
=( $ 760,350/685000 ) x 100 = 111%
Which means 111% of companies assets are financed by debt.
December 2020
= ( 507,500 /875,000 ) x 100 = 58%
Which means 58% of total Assets of companies is financed by debt.
2.Current Ratio
= Current Assets/ current liabilities
December 2019
= (165,000/150,000 )= 1.10
December 2020
= (130,000/105,000) = 1.24
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Whispering Winds had total debt of $507,500 and $760,350 as at
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Whispering Winds Corp.’s balance sheet at December 31, 2018, is
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Cash
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Accounts payable
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Inventory
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Interest payable
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Prepaid insurance
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Bonds payable
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Equipment
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Common stock
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Retained earnings
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1.
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Whispering Winds Corp.’s balance sheet at December 31, 2018, is
presented below.
Whispering Winds Corp.
Balance Sheet
December 31, 2018
Cash
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Accounts payable
$13,050
Inventory
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Interest payable
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Prepaid insurance
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Bonds payable
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Equipment
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Common stock
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Retained earnings
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During 2019, the following transactions occurred.
1.
Whispering Winds paid $2,525 interest on the bonds on January
1, 2019.
2.
Whispering Winds purchased $243,900 of inventory on
account.
3.
Whispering Winds sold for $498,500...
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