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

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).