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Dividend Aristocrat Inc. (DA) borrowed $189,000 from Grow Business Bank to finance the purchase of equipment costing $141,750 and to provide $47,250 in cash. The
Dividend Aristocrat Inc. (DA) borrowed $189,000 from Grow Business Bank to finance the purchase of equipment costing $141,750 and to provide $47,250 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in annual instalments of $9,450. The terms of the loan also indicate that DA must maintain a current ratio of 1.25 and cannot pay dividends that will reduce retained earnings below $97,000. The 2020 year-end statement of financial position, immediately prior to the bank loan and the purchase of equipment, follows: Current assets $93,800 Current liabilities $67,000 Non-current assets 373,200 Long-term liabilities 189,000 Common shares 92,000 Retained earnings 119,000 Total liabilities and shareholders' equity Total assets $467,000 $467,000 Prepare the following statement of financial position assuming the maximum divided is declared and paid. Prepare the following statement of financial position assuming the maximum divided is declared and paid. Current Assets $ Current Liabilities TA $ Non-current Assets Long-term Liabilities Common Shares Retained Earnings $ Total Liabilities and Shareholder's Equity $ Total Assets Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, eg. 7.25.) Current Ratio Dividend Aristocrat Inc. in compliance with the loan agreeement
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