70.2K

Verified Solution

Link Copied!

Question.

Part - 1

Part -2

part - 3

part - 4

Kindly answer all the 4 parts.

On May 1,2020, Christina Fashions borrowed $93,000 at a bank by signing a four-year, 6% loan. The terms of the loan require equal principal payments of $23,250 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 31,2020 , year-end statement of financial position, immediately prior to the reclassification of long-term debt, follows: Does Christina 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 1 decimal place, e.g. 1.2.) Current ratio Christina Fashions the bank's minimum current ratio. Prepare journal entries to record the interest payable on December 31,2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manuolly. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Prepare the journal entries to reclassify the portion of the long-term loan as current. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Does Christina Fashions breach the bank's current ratio requirement after preparing the journal entries above? (Round answer to 2 decimal places, e.g. 1.25.) Current ratio Christina Fashions the bank's minimum current ratio

Answer & Explanation Solved by verified expert

See Answer