The following selected account balances are from LightHouse Distributors’ adjusted trial balance at September 30, 2024:

Accounts payable                                                               $ 90,000 

Accounts receivable........................................................   182,000 

Bank indebtedness...........................................................   62,500 

CPP payable .........................................................................  7,500 

EI payable ............................................................................   3,750 

HST payable ........................................................................ 15,000 

Income tax payable .............................................................35,000 

Interest payable ..................................................................10,000  

Merchandise inventory ....................................................275,000 

Mortgage payable ............................................................ 150,000 

Notes payable....................................................................100,000 

Prepaid expenses ...............................................................12,500 

Property taxes payable ..................................................... 10,000 

Unearned revenue ............................................................. 30,000 

Vacation pay payable ........................................................ 13,500 

Warranty liability ...............................................................  22,500 

Workers’ compensation payable........................................ 1,250

Additional information: 

1. On September 30, 2024, the unused operating line of credit is $75,000. 

2. Warranties and gift cards are expected to be redeemed within one year. Unearned revenues relate to gift cards sold but not yet redeemed. 

3. Of the mortgage, $10,000 is due each year. 

4. Of the note payable, $1,000 is due at the end of each month. 

Instructions 

a. Prepare the current liabilities section of the balance sheet. 

b. Calculate LightHouse’s current ratio and acid-test ratio. 

c. Explain why the company did not report any cash as part of its current assets.  

The accountant for LightHouse argues that, since property taxes are unavoidable, a company should record the full year’s worth of property taxes as an expense when it is paid. Is the accountant correct? Explain.