The following is a December 31, 2021, post-closing trial balance for Culver City Lighting, Inc. Account Title Debits Credits Cash $ 63,000 Accounts receivable 47,000 Inventory 53,000 Prepaid insurance 23,000 Equipment 110,000 Accumulated depreciation $ 42,000 Patent (net) 48,000 Accounts payable 16,000 Interest payable 6,000 Notes payable (due in 10 years) 140,000 Common stock 78,000 Retained earnings 62,000 Totals $ 344,000 $ 344,000 a. Calculate the current ratio. b. Calculate the acid-test ratio. c. Calculate the debt to equity ratio.

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ayokenny2001 ayokenny2001 · Answer 1 · 2020-09-09T06:35:40+02:00

Answer:

a. Current ratio = 5.17

b. Acid test ratio = 3.06

c. Debt to equity ratio = 0.26

Explanation:

a. Current ratio = Current assets / Current liabilities

Current t assets = $63,000 + $47,000 + $53,000 + $23,000

= $186,000

Current liabilities = $16,000 + $6,000 + *$14,000

= $36,000

• Note $14,000 is gotten by ; $140,000 / 10 years.

Current ratio = $186,000 / $36,000

= 5.17

b. Acid test ratio = Quick assets / Current liabilities

Quick assets = Current assets w/o inventory

= $63,000 + $47,000

= $110,000

Current liabilities = $36,000

Acid test ratio = $110,000 / $36,000

= 3.06

c. Debt to equity ratio = Total liabilities / Shareholder's equity

Total liabilities = $36,000

Shareholder's equity = $78,000 + $62,000

= $140,000

Debt to equity ratio = $36,000 / $140,000

= 0.26