• Case Study 21-1, p. 768

21.1 Contemporary Wood Furniture Charles Royston was checking the year-end balances for his wood furniture manufacturing and re-tail business and was concerned about the numbers. From what he remembered, his debts and ac-counts receivable were higher than the previous year.

Rather than get worked up over nothing, he decided he would gather the information and make a comparison. For December 31, 2011, the business had current assets of: $1,844 cash, $11,807 accounts receivable, and $9,628 inventory. Plant and equipment totaled $158,700. Current liabilities were: accounts payable $13,446; wages payable $650; and property and taxes payable $4,124. Long-term debt totaled $92,800 and owner’s equity $70,959.

By comparison, for December 31, 2010, the business had current assets of: $3,278 cash; $6,954 accounts receivable; $17,417 inventory. Plant and equipment totaled $144,500. Current liabilities were: accounts payable $9,250; wages payable $1,110; property and taxes payable $3,650. Long-term debt totaled $75,800; and owner’s equity $82,339.

2. Calculate the current ratio and the total debt to total assets ratio for 2010 and 2011.

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