The adjusted trial balance of L Farrish Corporation at May
The adjusted trial balance of L. Farrish Corporation at May 31, 2014, follows:


Requirements
1. Prepare L. Farrish Corporation’s 2014 single step 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.
2. Farrish’s lenders require that the company maintain a debt ratio no higher than 0.50. Compute Farrish’s debt ratio at May 31, 2014, to determine whether the company is in compliance with this debt restriction. If not, suggest a way L. Farrish Corporation could have avoided this difficultsituation.
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