The classified balance sheet and selected income statement data for Amarillo Auto Supply, Inc., as of December 31, 2018, are presented next.

Selected Income Statement Data

Gross Profit..........................................................$275,600Operating Expenses..............................................184,300Earnings Before Interest and Taxes......................91,300Interest Expense......................................................16,500Income Tax Expense...............................................17,100Net Income..............................................................57,700

Requirements

1. Calculate Amarillo Auto Supply?s debt ratio and interest coverage ratio as of December 31, 2018. Round to two decimal places.

2. What percentage of Amarillo Auto Supply?s assets belong to the stockholders?

3. Would you be willing to extend credit to Amarillo Auto Supply? Why or why not?

Transcribed Image Text:

Amarillo Auto Supply, Inc. Balance Sheet December 31, 2018 LIABILITIES ASSETS Current Liabilities: Accounts Payable 12,100 Salaries Payable Current Assets: $ 19,900 $ 5,400 Cash Accounts Receivable 2,100 2,450 Unearned Service Revenue Supplies Prepaid Rent 600 Note Payable 3,800 9,000 18,950 $ 36,400 Total Current Assets Total Current Liabilities Long-Term Debt: Mortgage Note Payable Bonds Payable Total Long-Term Debt Fixed Assets: 60,000 28,000 Land $ 32,000 Equipment 120,000 148,000 Less: Accumulated Depreciation, Equipment | Building 11,000 21,000 275,000 STOCKHOLDERS' EQUITY Less: Accumulated Common Stock 24,000 75,000 200,000 281,000 Retained Earnings Total Stockholders' Equity Depreciation, Building Total Fixed Assets 126,450 150,450 Total Liabilities and $317,400 Stockholders' Equity $317,400 Total Assets