The accounting records of Airdrie Foods, Inc., include the following items at December? 31, 2014?:

Requirement 1. Show how each relevant item would be reported on the Airdrie

?Foods, Inc., classified balance? sheet, including headings and totals for current liabilities and? long-term liabilities.

	Airdrie Foods, Inc.
	Partial Balance Sheet
	December 31, 2014
Assets				Liabilities
Property, plant, and equipment:				Current liabilities:
				Total current liabilities
				Long-term liabilities:
				Less:
				Total long-term liabilities

Requirement 2. Answer the following questions about Airdrie?'s financial position at December? 31, 2014?:

a. What is the carrying amount of the bonds? payable? (Combine the current and? long-term amounts.)

?$

b. Why is the? interest-payable amount so much less than the amount of interest? expense?

Interest payable is the amount of interest that the company owes at year-end OR company's cost of borrowing for the full year

Interest expense is the amount of interest that the company owes at year-end OR company's cost of borrowing for the full year

Requirement 3. How many times did Airdrie cover its interest expense during 2014??

?(Round your answer to two decimal? places.) Airdrie covered its interest expense

times.

Requirement 4. Assume that all of the existing liabilities are included in the information provided. Calculate the leverage ratio and debt ratio of the company. Evaluate the health of the company from a leverage point of view. What other information would be helpful in making your? evaluation?

Begin by computing the leverage ratio. Select the? formula, then enter the amounts to calculate the leverage ratio. ?(Round your answer to two decimal? places.)

		/		=	Leverage ratio
		/		=

?Now, select the formula for the debt ratio. Then complete the formula and calculate the debt ratio. ?(Round your answer to two decimal? places.)

		/		=	Debt ratio
		/		=

Evaluate the health of the company from a leverage point of view. What other information would be helpful in making your? evaluation?

The? company's debt ratio and leverage ratios are LOW / HIGH and operating income covers interest payments by ______ times. With this limited? information, the company appears to be LOW / HIGH risk from a leverage point of view.

The following would be helpful:

A) Additional information from prior years and competitors

B) Additional information on the inventory turnover

C) The debt principal payment due next year

D) The number of shares outstanding

Requirement 5. Independent of your answer to? (4), assume that Footnote 8 of the financial statements includes commitments for operating leases over the next 15 years in the amount of 3,700,000.

If the company had to capitalize these leases in 2014?, how would it change the leverage ratio and the debt? ratio? How would this change impact your assessment of the? company's health from a leverage point of? view?

Select the formula and compute the leverage ratio assuming that the company had to capitalize leases amounting to 3,700,000.

?(Round your answer to two decimal? places.)

		/		=	Leverage ratio
		/		=

Select the formula and compute the debt ratio assuming that the company had to capitalize leases amounting to 3,700,000.

?(Round your answer to two decimal? places.)

		/		=	Debt ratio
		/		=

How would this change impact your assessment of the? company's health from a leverage point of? view?

The leverage ratio and debt ratio would DECREASE / INCREASE / REMAIN THE SAME.

The company would now be considered high risk OR now be considered really low risk OR Still be considered healthy (average risk) from a leverage point of view.

Data Table Mortgage note payable Total assets 94,000 Accumulated depreciation, current portion Accumulated pension equipment 465,000 Discount on bonds payable benefit obligation 230,000 (all long-term) Bonds payable, long-term Mortgage note payable Operating income 312,000 Equipment long-term Bonds payable, current portion 470,000 Pension plan assets 224,000 (market value Interest expense Interest payable 4,550,000 165,000 26,000 420,000 745,000 445.000 80,000