On May 1, 2020, Christina Fashions borrowed $92,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $23,000 and accrued interest at 6% due annually on April 30. The loan agreement requires the company to maintain a minimum current ratio of 2.0. The December 31, 2020, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows:

Current assets		$120,000		Current liabilities		$50,000
Non-current assets		177,000		Loan payable		92,000
				Common shares		80,000
				Retained earnings		75,000
Total assets		$297,000		Total liabilities and shareholders equity		$297,000

1.Prepare journal entries to record the interest payable on December 31, 2020.

Account Titles and Explanation	Debit	Credit

2.Prepare the journal entries to reclassify the portion of the long-term loan as current.

Account Titles and Explanation	Debit	Credit

Does Christina Fashions breach the banks current ratio requirement after preparing the journal entries above? (Round answer to 2 decimal places.)

Current ratio

Christina Fashions does not meetmeets the banks minimum current ratio.