The adjusted trial balance for Carey Corporation at December 31, 2021, contained the following:

Of the lease liability amount, $22,800 is due within the next year. Total payments on the instalment note payable in 2022 will be $24,400, of which $7,480 is for interest. Total assets are $2,594,031 and profit is $173,500.

Instructions

a. Prepare the liabilities section of the balance sheet.

b. Calculate Carey?s debt to total assets and interest coverage ratios for the year ended December 31, 2021.

c. Based on the ratios calculated in part (b), what conclusions can you make about Carey?s solvency?

Taking It Further

Are long-term creditors more concerned with solvency or liquidity? Explain.

Transcribed Image Text:

Accounts payable Accounts receivable Allowance for doubtful accounts Bonds payable, due 2026 Interest payable Income tax expense Income tax payable Note payable Interest expense Lease liability Note receivable, due December 2023 Unearned revenue $ 76,000 4,450 1,000,000 30,000 74,353 $ 37,176 158,666 49,568 99,869 65,000 25,000