Preparing a classified balance sheet in report form, and using the current and debt ratios to evaluate a company Selected accounts of Browne Irrigation Systems at December 31, 2012, follow:
|
Insurance expense |
$ 500 |
Accounts payable |
$22,300 |
|
Note payable, long term |
4,200 |
Accounts receivable |
43,600 |
|
Other assets |
2,000 |
Accumulated depreciation—building |
24,200 |
|
Building |
58,200 |
Common stock |
16,300 |
|
Prepaid insurance |
4,800 |
Accumulated depreciation—equipment |
6,900 |
|
Salary expense |
17,700 |
Cash |
6,500 |
|
Salary payable |
2,800 |
Interest payable |
400 |
|
Service revenue |
73,000 |
Retained earnings, December 31, 2011 |
32,700 |
|
Supplies |
3,300 |
Equipment |
23,000 |
|
Unearned service revenue |
1,800 |
Depreciation expense |
25,000 |
Requirements
1. Prepare the company’s classified balance sheet in report form at December 31, 2012.
2. Compute the company’s current ratio and debt ratio at December 31, 2012. At December 31, 2011, the current ratio was 1.83 and the debt ratio was 0.39. Did the company’s ability to pay debts improve or deteriorate, or did it remain the same during 2012?