On May 1, 2024, Karen Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $26,500 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 (a) Current ratio $134,090 Karen Fashions 183,910 Current liabilities Loan payable Common shares Retained earnings $318,000 Total liabilities and shareholders' equity $53,000 î the bank's minimum current ratio. 106,000 79,500 Does Karen 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.) 79,500 $318,000
On May 1, 2024, Karen Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $26,500 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 (a) Current ratio $134,090 Karen Fashions 183,910 Current liabilities Loan payable Common shares Retained earnings $318,000 Total liabilities and shareholders' equity $53,000 î the bank's minimum current ratio. 106,000 79,500 Does Karen 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.) 79,500 $318,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On May 1, 2024, Karen Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of
the loan require equal principal payments of $26,500 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
(a)
Current ratio
$134,090
Karen Fashions
183,910
Current liabilities
Loan payable
Common shares
Retained earnings
$318,000 Total liabilities and shareholders' equity
$53,000
the bank's minimum current ratio.
106,000
79,500
Does Karen 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.)
79,500
$318,000
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