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On May 1, 2024, Karen Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal
On May 1, 2024, Karen Fashions borrowed $106,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $26,500 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, 2024, year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Current assets $134,090 Current liabilities $53,000 Non-current assets 183,910 Loan payable 106,000 Common shares 79,500 Retained earnings 79,500 Total assets $318,000 Total liabilities and shareholders' equity $318,000 (a) Does Karen Fashions comply with the bank's current ratio requirement prior to recording the accrued interest and reclassification of the current portion of the long-term loan? (Round answer to 2 decimal places, e.g. 1.20.) Current ratio Karen Fashions the bank's minimum current ratio.
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