(L.OBJ. 5, 6) Preparing a classified balance sheet, and calculating the current and debt...

(L.OBJ. 5, 6) Preparing a classified balance sheet, and calculating the current and debt ratios (15-20 min]

The adjusted trial balance and the income statement amounts from the December work sheet of Carroll Pet Shop Company follow:

Requirements

1. Prepare the classified balance sheet of Carroll Pet Shop Company at December 31, 2011. Use the report form. You must compute the ending balance of Capital.

2. Compute Carroll’s current ratio and debt ratio at December 31, 2011. One year ago, the current ratio was 1.81 and the debt ratio was 0.35. Indicate whether Carroll’s ability to pay current and total debts has improved, deteriorated, or remained the same during the current year.