eTextbook and MediaList of AccountsYour answer is incorrect.Does Christina Fashions breach the bank's current ratio requirement after preparing the journal entries above? (Roto 2 decimal places, e.g. 1.25.)Current ratioChristina Fashionsdoes not meetthe bank's minimum current ratio.eTextbook and MediaList of Accounts Current Attempt in ProgressOn May 1, 2020, Christina Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of the loan requireequal principal payments of $26,500 and accrued interest at 6% due annually on April 30. The loan agreement requires thecompany to maintain a minimum current ratio of 2.0. The December 31, 2020, year-end statement of financial position, immediatelyprior to the reclassification of long-term debt, follows:Current assets$137,800Current liabilities$53,000Non-current assets163,200Loan payable106,000Common shares72,000Retained earnings70,000Total liabilities andTotal assets$301,000shareholders' equity$301,000Your answer is partially correct.Does Christina Fashions comply with the bank's current ratio requirement prior to recording the accrued interest andreclassification of the current portion of the long-term loan? (Round answer to 1 decimal place, e.g. 1.2.)Current ratio2.6Christina Fashionsv the bank's minimum current ratio.meets

Current ratio: The current ratio is a liquidity ratio. It denotes company's ability to pay…

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Current ratio Christina Fashions does not meet v the bank's minimum current ratio.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter14: Financing Liabilities: Bonds And Long-term Notes Payable

Section: Chapter Questions

Problem 12P: Hamlet Corporation purchases computer equipment at a price of 100,000 on January 1, 2019, paying...

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Everglades Consultants takes out a loan in the amount of $375,000 on April 1. The terms of the loan include a repayment of principal in eight, equal installments, paid annually from the April 1 date. The annual interest rate on the loan is 5%, recognized on December 31. (Round answers to the nearest cent, if needed.) A. Compute the interest recognized as of December 31 in year 1. B. Compute the principal due in year 1.
Short-Term Debt Expected to Be Refinanced On December 31, 2019, Atwood Table Company has 8 million of short-term notes payable owed to City National Bank. On February 1, 2020, Atwood negotiates a revolving credit agreement providing for unrestricted borrowings up to 6 million. Borrowings will bear interest at 1% over the prevailing prime rate, will have stated maturities of 120 days, and will be continuously renewable for 120-day periods for 4 years. Atwood plans to refinance as much as possible of the notes outstanding with the proceeds available from this agreement. Assume that Atwoods December 31, 2019, year-end financial statements are issued on March 30, 2020. Required: Prepare a partial December 31, 2019, balance sheet for Atwood showing how the 8 million short-term debt should be reported. Next Level What is the justification for allowing short-term debt that is expected to be refinanced to be classified as a long-term liability.
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Campus Flights takes out a bank loan in the amount of $200,500 on March 1. The terms of the loan include a repayment of principal in ten equal installments, paid annually from March 1. The annual interest rate on the loan is 8%, recognized on December 31. (Round answers to the nearest whole dollar if needed.) A. Compute the interest recognized as of December 31 in year 1 rounded to the whole dollar. B. Compute the principal due in year 1.