Wildhorse Aristocrat nc. (WA) borrowed $210,000 from Grow Business Bank to finance the purchase of equipment costing $157,500 and to provide $52,500 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in annual instalments of $10,500. The terms of the loan also indicate that WA must maintain a current ratio of 1.25 and cannot pay dividends that will reduce retained earnings below $105,000. The 2024 year-end statement of financial position, immediately prior to the bank loan and the purchase of equipment, follows: Current assets $108,675 Current liabilities $78,750 Non-current assets 415,590 Long-term liabilities 210,000 Common shares 105,000 Retained earnings 130,515 Total assets $524,265 Total liabilities and shareholders' equity $524,265 Prepare the following statement of financial position assuming the maximum divided is declared and paid. Current Assets $ Non-current Assets $ Total Assets Current Liabilities Long-term Liabilities Common Shares $ Retained Earnings Total Liabilities and Shareholder's Equity $ Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, e.g. 7.25.) Current ratio Wildhorse Inc. in compliance with the loan agreement.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Wildhorse Aristocrat nc. (WA) borrowed $210,000 from Grow Business Bank to finance the purchase of equipment costing $157,500
and to provide $52,500 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in
annual instalments of $10,500. The terms of the loan also indicate that WA must maintain a current ratio of 1.25 and cannot pay
dividends that will reduce retained earnings below $105,000. The 2024 year-end statement of financial position, immediately prior to
the bank loan and the purchase of equipment, follows:
Current assets
$108,675
Current liabilities
$78,750
Non-current assets 415,590
Long-term liabilities
210,000
Common shares
105,000
Retained earnings
130,515
Total assets
$524,265
Total liabilities and shareholders' equity
$524,265
Prepare the following statement of financial position assuming the maximum divided is declared and paid.
Current Assets
$
Non-current Assets
$
Total Assets
Current Liabilities
Long-term Liabilities
Common Shares
19
$
Retained Earnings
Total Liabilities and Shareholder's Equity
$
Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, e.g. 7.25.)
Current ratio
Wildhorse Inc.
in compliance with the loan agreeement.
Transcribed Image Text:Wildhorse Aristocrat nc. (WA) borrowed $210,000 from Grow Business Bank to finance the purchase of equipment costing $157,500 and to provide $52,500 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in annual instalments of $10,500. The terms of the loan also indicate that WA must maintain a current ratio of 1.25 and cannot pay dividends that will reduce retained earnings below $105,000. The 2024 year-end statement of financial position, immediately prior to the bank loan and the purchase of equipment, follows: Current assets $108,675 Current liabilities $78,750 Non-current assets 415,590 Long-term liabilities 210,000 Common shares 105,000 Retained earnings 130,515 Total assets $524,265 Total liabilities and shareholders' equity $524,265 Prepare the following statement of financial position assuming the maximum divided is declared and paid. Current Assets $ Non-current Assets $ Total Assets Current Liabilities Long-term Liabilities Common Shares 19 $ Retained Earnings Total Liabilities and Shareholder's Equity $ Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, e.g. 7.25.) Current ratio Wildhorse Inc. in compliance with the loan agreeement.
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