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On May 1, 2024, Elizabeth Fashions borrowed $88,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $22,000 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2024, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets Non-current assets Total assets Show Transcribed Text Current ratio $107,360 156,640 Elizabeth Fashions $264,000 Current liabilities Loan payable Common shares Retained earnings Total liabilities and shareholders' equity Does Elizabeth Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 2 decimal places, e.g. 1.20.) $44,000 88,000 66,000 66,000 $264,000 the bank's minimum current ratio.

On May 1, 2024, Elizabeth Fashions borrowed $88,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $22,000 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2024, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets Non-current assets Total assets Show Transcribed Text Current ratio $107,360 156,640 Elizabeth Fashions $264,000 Current liabilities Loan payable Common shares Retained earnings Total liabilities and shareholders' equity Does Elizabeth Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 2 decimal places, e.g. 1.20.) $44,000 88,000 66,000 66,000 $264,000 the bank's minimum current ratio.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On May 1, 2024, Elizabeth Fashions borrowed $88,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $22,000 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2024, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets Non-current assets Total assets Show Transcribed Text Current ratio Elizabeth Fashions $107,360 156,640 Show Transcribed Text $264,000 Current liabilities Loan payable Common shares Retained earnings Total liabilities and shareholders' equity c Does Elizabeth Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 2 decimal places, e.g. 1.20.) $44,000 88,000 66,000 66,000 the bank's minimum current ratio. $264,000
Transcribed Image Text:On May 1, 2024, Elizabeth Fashions borrowed $88,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $22,000 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2024, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets Non-current assets Total assets Show Transcribed Text Current ratio Elizabeth Fashions $107,360 156,640 Show Transcribed Text $264,000 Current liabilities Loan payable Common shares Retained earnings Total liabilities and shareholders' equity c Does Elizabeth Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 2 decimal places, e.g. 1.20.) $44,000 88,000 66,000 66,000 the bank's minimum current ratio. $264,000
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