Question
Prepare Balsamo Corporation's 2018 single-step income statement, statement of retained earnings, and balance sheet. Balsamo lenders require that the company maintain a debt ratio no
Prepare Balsamo Corporation's 2018 single-step income statement, statement of retained earnings, and balance sheet. Balsamo lenders require that the company maintain a debt ratio no higher than
0.50. Calculate Balsamo debt ratio at December 31, 2018, to determine whether the company is in compliance with this debt restriction. If not, suggest a way that Balsamocould have avoided this difficult situation.
Balsamo Corporation
Adjusted Trial Balance
December 31, 2018
| Account | Debit | Credit |
| Cash | $12,400 |
|
| Accounts receivable | 19,600 |
|
| Supplies | 2,200 |
|
| Prepaid rent | 1,200 | |
| Equipment | 37,100 |
|
| Accumulated depreciationequipment |
| $4,100 |
| Accounts payable |
| 9,400 |
| Interest payable | 200 | |
| Unearned service revenue |
| 700 |
| Income tax payable |
| 2,000 |
| Note payable | 18,100 | |
| Common stock |
| 14,000 |
| Retained earnings | 5,000 | |
| Dividends | 2,000 |
|
| Service revenue |
| 89,500 |
| Depreciation expenseequipment | 1,100 |
|
| Salary expense | 40,500 |
|
| Rent expense | 11,200 |
|
| Supplies expense | 2200 |
|
| Income tax expense | 6900 |
|
| Total | $143,000 | $143,00 |
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