(Question and Answer): The following is a December 31, 2018, post-closing trial balance for Culver City Lighting, Inc. a. Calculate the current ratio. b

The following is a December 31, 2018, post-closing trial balance for Culver City Lighting, Inc. Account Title Cash Accounts receivable Inventories Prepaid insurance Equipment Accumulated depreciation-equipment Patent, net Accounts payable Interest payable Note payable (due in 10, equal annual installments) Common stock Retained earnings Totals Debits Credits 66,000 50,000 56,000 26,000 100,000 45,000 51,000 17,500 7,500 120,000 81,000 78,000 349,000 349,000 a. Calculate the current ratio b. Calculate the acid-test ratio c. Calculate the debt to equity ratio

The following is a December 31, 2018, post-closing trial balance for Culver City Lighting, Inc. a. Calculate the current ratio. b. Calculate the acid-test ratio. c. Calculate the debt to equity ratio.

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Total current assets=(Cash+Accounts receivable+Inventories+PRepaid insurance)

=($66000+$50000+$56000+26000)=$198000

Total current liabilities=(Accounts payable+Interest payable+Current portion of notes payable_)(Current portion of notes payable is the balance in next 12 months=($120,000/10)=$12000)

=($17500+7500+12000)=$37000

Hence

1.Current ratio=Current assets/Current liabilities

=($198000/$37000)=5.35(Approx)

2.Acid test ratio=(Current assets-inventory-prepaid expenses)/Current liabilities

=($198000-56000-26000)/37000=3.14(Approx).

3.

Total debt=(Interest payable+Accounts payable+Notes payable)’

=($17500+$7500+120,000)=145000

total equity=(Common stock+Retained earnings_)

=($81000+78000)=$159000

Hence Debt to equity ratio=Debt/Equity

=(145000/159000)

=0.91(Approx).

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