The adjusted trial balance for Sykes Ltd. at October 31, 2017, contained the following:

Of the lease liability amount, $26,430 is due within the next year. Total payments on the note payable in the next 12 months will be $20,800, of which $11,125 is for interest. Sykes reported profit for the year ended October 31, 2017, of $36,000. Total assets are $2,044,147.
Instructions
(a) Prepare the liabilities section of the balance sheet.
(b) Calculate Sykes's debt to total assets and interest coverage ratios for the year ended October 31, 2017.
(c) Based on the ratios calculated in part (b), what conclusions can you make about Sykes's solvency?
TAKING IT FURTHER
What other information would help in the analysis of the company's solvency?

Transcribed Image Text:

Accounts payable Accounts receivable Allowance for doubtful accounts Bonds payable, due 2020 Interest payable Income tax expense 7,000 98,000 4,900 500,000 15,000 11,800 Income tax payable Note payable Interest expense Lease liability Note receivable, due December 2018 Unearned revenue $ 5,900 230,211 53,330 40,243 35,000 10,000 5