Prepare the classified balance sheet of Brian O’Brion Dance Studio Company

Price: $2.99 


E4-23 Preparing a classified balance sheet, and calculating the current and debt ratios [15-20 min]

The adjusted trial balance and the income statement amounts from the August worksheet of Brian O’Brion Dance Studio Company follow:

BRIAN O’BRION DANCE STUDIO COMPANY Partial Worksheet Month Ended August 31, 2012
		Adjusted Trial Balance
	Account	Debit	Credit
	Cash	$15,800
	Supplies	2,000
	Prepaid rent	900
	Equipment	49,000
	Accumulated depreciation		$ 5,500
	Accounts payable		4,500
	Salary payable		500
	Unearned service revenue		5,100
	Long-term note payable		4,400
	O’Brion, capital		36,500
	O’Brion, drawing	1,100
	Service revenue		18,100
	Salary expense	3,000
	Rent expense	1,500
	Depreciation expense	300
	Supplies expense	400
	Utilities expense	600
	Total	$74,600	$74,600

Requirements

1. Prepare the classified balance sheet of Brian O’Brion Dance Studio Company at August 31, 2012. Use the report form. You must compute the ending balance of O’Brion, capital.

2. Compute O’Brion’s current ratio and debt ratio at August 31, 2012. One year ago, the current ratio was 1.49 and the debt ratio was 0.29. Indicate whether O’Brion’s ability to pay current and total debts has improved, deteriorated, or remained the same during the current year.