The following is a December 31, 2018, post-closing trial balance
for Culver City Lighting, Inc.
| Account Title | Debits | Credits | ||||
| Cash | $ | 55,000 | ||||
| Accounts receivable | 39,000 | |||||
| Inventories | 45,000 | |||||
| Prepaid insurance | 15,000 | |||||
| Equipment | 100,000 | |||||
| Accumulated depreciation—equipment | $ | 34,000 | ||||
| Patent, net | 40,000 | |||||
| Accounts payable | 12,000 | |||||
| Interest payable | 2,000 | |||||
| Note payable (due in 10, equal annual installments) | 100,000 | |||||
| Common stock | 70,000 | |||||
| Retained earnings | 76,000 | |||||
| Totals | $ | 294,000 | $ | 294,000 | ||
a. Calculate the current ratio.
b. Calculate the acid-test ratio.
c. Calculate the debt to equity ratio.
Current Assets = Cash + Accounts receivables + Inventory + Prepaid insurance
= $55,000 + $39,000 + $45,000 + $15,000
= $154,000
Current liabilities = Accounts payable + Interest payable + Notes payable current portion
= $12,000 + $2,000 + $10,000
= $24,000
Total debt = Accounts payable + Interest payable + Notes payable
= $12,000 + $2,000 + $100,000
= $114,000
Total Equity = Common stock + Retained earnings
= $70,000 + $76,000
= $146,000
Current ratio = Current Assets / Current liabilities
= $154,000 / $24,000
= 6.42
Quick ratio = (Cash + Accounts receivable) / Current liabilities
= ($55,000 + $39,000) / $24,000
= 3.92
Debt Equity ratio = Total debt / Total Equity
= $114,000 / $146,000
= 0.78
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