The adjusted trial balance of Simpson Corporation at March 31, 2012, follows. Requirements 1. Prepare Simpson Corporations

The adjusted trial balance of Simpson Corporation at March 31, 2012, follows.

Requirements
1. Prepare Simpson Corporation’s 2012 income statement, statement of retained earnings, and balance sheet. List expenses (except for income tax) in decreasing order on the income statement, and show total liabilities on the balance sheet. Draw arrows linking the three financial statements.
2. Simpson’s lenders require that the company maintain a debt ratio no higher than 0.60. Compute Simpson’s debt ratio at March 31, 2012, to determine whether the company is in compliance with this debt restriction. If not, suggest a way that Simpson could have avoided this difficultsituation.

Transcribed Image Text:

Simpson Corporation Adjusted Trial Balance March 31, 2012 Account DebitCredit S 1,700 8,800 Accounts receivable Prepaid rent Equipment Accumulated depreciation Accounts payable Interest payable Unearned service revenue Income tax paya Note payable Common stock Retained earnings Dividends Service revenue Depreciation expense Salary expense Rent expense Interest expense Insurance expense Supplies expense Income tax expense Total 1,700 36,000 S 4,600 3,100 700 800 2,400 18,400 3,000 23,000 105,500 1,300 39,800 10,100 2,700 4,000 2,400 7,000 1 $140,500 $140,500