Preparing a classified balance sheet in report form, and using the current and debt ratios...

Preparing a classified balance sheet in report form, and using the current and debt ratios to evaluate a company [30-40 min]

Selected accounts of Blume Irrigation System at December 31, 2012, follow:

Requirements

1. Prepare the company’s classified balance sheet in report form at December 31, 2012.

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2. Compute the company’s current ratio and debt ratio at December 31, 2012. At December 31, 2011, the current ratio was 1.81 and the debt ratio was 0.34. Did the company’s ability to pay debts improve or deteriorate, or did it remain the same during 2012?