A series of substantial net losses from operations has resulted in the following balance sheet drafted by the controller of Nobis, Ortho & Parr LLP:

Concerned about the partnership’s high debt-to-equity ratio of 470.6% ($800,000 $170,000 470.6%), the partners consult with Jack Julian, CPA, controller of the partnership, who is a member of the AICPA, FEI, and IMA (see Chapter 1), regarding the propriety of converting partner Ortho’s capital deficit to an account receivable. Ortho shows Julian a personal financial statement showing net assets of more than $400,000; Ortho points out that the bulk of her assets are in long-term investments that are difficult to liquidate to obtain cash for investment in the partnership. Partner Ortho is willing to pledge high-grade securities in her personal portfolio of investments to secure the $120,000 amount.
Instructions

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Current assets Plant assets (net) Total assets NOBIS, ORTHO & PARR LLP Balance Sheet July 31, 2005 Assets Current liabilities Long-term debt Total liabilities Art Nobis, capital Liabilities and Partners' Capital June Ortho, capital Carl Parr, capital Total partners' capital Total liabilities and partners' capital $420,000 550,000 $970,000 $380,000 420,000 $800,000 $130,000 (120,000) 160,000 170,000 $970,000