Pina colada & associates inc. reports the following account balances for the year ending june 30, 2022: accounts payable $28,000 accounts receivable 37,000 cash and cash equivalents 15,600 goodwill 131,000 inventory 80,000 notes payable (due 2027) 103,000 interest payable 3,700 notes payable (due 2023) 14,500 property, plant, and equipment 530,000 accumulated depreciation 106,000 prepaid insurance 11,460 salaries and wages payable 12,600 bonds payable 315,000 compute the company’s (a) current ratio and (b) debt to assets ratio.

a) current ratio of the company is = 3.25

b) debt to assets ratio of the company is = 68%

Explanation:

a) The current ratio measures a company's ability to pay debts till 12 months long. The formula is calculated by dividing the current assets over the current debts.

current assets

Cash and cash equivalents $15,600

+

Accounts receivable $37,000

+

Prepaid insurance $11,460

+

Inventory $80,000

current assets $144,060

current debts

Accounts payable $28,000

+

Salaries and wages payable $12,600

+

Interest payable $3,700

Currents debts $44,300

current ratio=$144,060/$44,300=3.25

b) The debt to total assets ratio indicates the percentage of a company's total assets that were financed by creditors. For its calculation it is necessary to divide all the debts or liabilities by all the assets.

total assets

current assets $144,060

+

non currents assets

Goodwill $131,000

+

Property, plant, and equipment 530,000

-

Accumulated depreciation 106,000

assets $699,060

Total debts or liabilities

current liabilities $44,300

+

non current liabilities

Notes payable (due 2027) $103,000

Notes payable (due 2023) $14,500

Bonds payable $315,000

debts $476,800

debt to total assets ratio = $476,800/$699,060=0,68 or 68%

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