Question

Prepare the liability section of the balance sheet based on the following balances taken from the adjusted trial balance of Sal Co. as of 12/31/18

Notes Payable, due 1/1/2020………………………………………………………….………$2,400,000

Bonds Payable, due 7/1/2019……………………………………………………….………...$3,000,000

Notes Payable, equal annual installations payable on 3/1 for each of the next 5 years……..$500,000

Accounts Payable………………………………………………………………………………...$245,000

Unearned Revenue…………………………………………………………………………..…..$120,000

Salary Payable……………………………………………………………………………………. $40,000

Asset Retirement Obligation,12/31/2026……………………………………………………$2,450,000

2. If current assets are $10,000,000 and total assets are $20,000,000, what is the (1) current ratio and (2) debt ratio

Answer 1

BALANCE SHEET (PARTIAL) AS ON 12/31/2020 Short term Liabilities Accounts Payable $245,000 Unearned Revenue $120,000 Salary payable $40,000 Notes Payable - payable within the year $500,000 Bonds Payable during the year $3,000,000 Total Short-term Liabilities $3,905,000 Long-term Liabilities Notes Payable 1/1/2020 ($2,400000 - $500,000) $1,900,000 Asset Retirement Obligation $2,450,000 Total Long-term Liabilities $4,350,000 Total Liabilities $8,255,000

B. Current ratio = 10000000 : 3905000 = 2.56 : 1

Debt ratio = Debt / total assets = $8255000 / $20000000 = .41275 or 41.275%