1.
Liabilities: Liabilities are debt and obligations of a business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be short-term or long-term depending upon the time duration in which it is paid back to the creditors.
To report: Liabilities on the balance sheet.
2.
Debt to equity ratio: Debt to equity ratio is used to evaluate the relationship between the total liabilities and total equity of the company. Debt to equity ratio helps the company to determine the proportion of debt and equity. When the ratio is greater than 1, then it is higher and thus, company faces higher risk. Debt to equity ratio is calculated by using the following formula:
To calculate: Debt to equity ratio.
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Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
- Preparing a Debt Disclosure As of December 31 of Year 1, Dole Company's long-term debt consisted of the following: • $114,300-Unsecured note payable to bank due Year 2. • $405,000 -Unsecured note payable to bank due Year 4. • $540,000 --Unsecured note payable to bank due Year 6. • $81,000-Secured mortgage payable to bank due in equal installments in Year 2 through Year 6. . • $144,000-Secured note payable to bank due in Year 7. Prepare the required financial statement disclosure at December 31 of Year 1, indicating the amounts due in each of the next five years and thereafter. Note Payable Year 3 Year 4 Year 5 Year 6 Year 2 114,300 $ 0 ✓ 0✔ 40,500 * 0 ✓ 154,800 $ Total $114,300 $ 405,000 540,000 81,000 144,000 $ 0✔ $ 0✔ 0✔ 0 x 0✔ 0 $ 0✔ $ 405,000 ✓ 0 ✓ 0 x 0 ✓ 405,000 $ 0✔ $ 0✔ 0 ✓ 0 x 0 ✓ 0 $ 0✔ $ 0✔ 540,000 ✓ 40,500 x 0 ✓ 580,500 $ Thereafter 0✓ 0✔ 0 ✓ 0 ✓ 144,000 ✓ 144,000arrow_forwardAssume bonds payable are amortized using the straight-line amortization method unless stated otherwise. Computing the debt to equity ratio Jackson Corporation has the following amounts as of December 31, 2018. Compute the debt to equity ratio at December 31, 2018.arrow_forwardRecording in the Accounting System On January 1, 2014, Jack Company issues the $4,110,000, 8%, 10-year bonds described above for cash of $3,373,263. Journalize the issuance of the Jack Company bonds.arrow_forward
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