Preparing a classified balance sheet, and calculating the current and debt ratios [15-20 m...

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 August work-sheet of Brian O’Brion Dance Studio Company follow:

Requirements

1. Prepare the classified balance sheet of Brian O’Brion Dance Studio Company at August 31, 2012. Use the report form. You must compute the ending balance of Retained earnings.

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2. Compute O’Brion’s current ratio and debt ratio at August 31, 2012. One year ago, the current ratio was 1.49 and the debt ratio was 0.29. Indicate whether O’Brion’s ability to pay current and total debts has improved, deteriorated, or remained the same during the current year.