Reporting Liabilities in a Balance SheetThe following items were taken from the accounting...

Reporting Liabilities in a Balance Sheet

The following items were taken from the accounting records of Minnesota Satellite Telephone Corporation (MinnSat) for the year ended December 31,2011 (dollar amounts are in thousands):

Other Information

1. The 63/4% percent bonds due in February 2012 will be refinanced in January 2012 through the issuance of $150,000 in 9 percent, 20-year bonds payable.

2. The 81/2% percent bonds due June 1,2012, will berepaid entirely from a bond sinking fund.

3. MinnSat is committed to total lease payments of $14,400 in 2012. Ofthis amount, $7,479 is applicable to operating leases, and $6,921 tocapital leases. Payments on capital leases will be applied as follows : $2,300 to interest expense and $4,621 to reduction in thecapitalized lease payment obligation.

4. MinnSat’s pension plan is fully funded with an independent trustee.

5. The obligation for postretirement benefits other than pensions consists of a commitment to maintain health insurance forretired workers. During 2012, MinnSat will fund $18,000 of this obligation.

6. The $17,300 inincome tax payable relates toincome taxes levied in2011 and must bepaid on or before March 15,2012. No portion of the deferred tax liability is regarded asa current liability.

Instructions

a. Using this information, prepare the current liabilities and long-term liabilities sections of classified balance sheet as of December 31,2011. (Within each classification, items may be listed in any order.)

b. Explain briefly how the information in each of the six numbered paragraphs affected yourpresentation of thecompany’s liabilities.

c. Compute as of December 31, 2011, the company’s (1) debt ratio and (2) interest coverage ratio.

d. Solely on the basis of information stated in this problem, indicate whether this companyappears tobeanoutstanding, medium, or poor long-term credit risk. State specific reasons for your conclusion.