On May 1, 2020, Christina Fashions borrowed $95,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $23,750 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		$117,300		Current liabilities		$51,000
Non-current assets		184,700		Loan payable		95,000
				Common shares		81,000
				Retained earnings		75,000
Total assets		$302,000		Total liabilities and shareholders equity		$302,000

Does Christina Fashions comply with the banks current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 1 decimal place, e.g. 1.2.)

Current ratio

Christina Fashions the banks minimum current ratio.

Prepare journal entries to record the interest payable on December 31, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Prepare the journal entries to reclassify the portion of the long-term loan as current. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.)

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, e.g. 1.25.)

Current ratio

Christina Fashions the banks minimum current ratio.