Application Problem 9-10A Dividend Aristocrat Inc. (DA) borrowed $197,000 from Grow Business Bank to finance the purchase of equipment costing $147,750 and to provide $49,250 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in annual instalments of $9,850. The terms of the loan also indicate that DA must maintain a current ratio of 1.25 and cannot pay dividends that will reduce retained earnings below $97,000. The 2020 year-end statement of financial position, immediately prior to the bank loan and the purchase of equipment, follows:

urrent assets		$93,800		Current liabilities		$70,000
Non-current assets		389,200		Long-term liabilities		197,000
				Common shares		94,000
				Retained earnings		122,000
Total assets		$483,000		Total liabilities and shareholders equity		$483,000

Prepare the following statement of financial position assuming the maximum divided is declared and paid.

Current Assets		$		Current Liabilities		$
Non-current Assets				Long-term Liabilities
				Common Shares
				Retained Earnings
Total Assets		$		Total Liabilities and Shareholders Equity		$

Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, e.g. 7.25.)

Current Ratio

Dividend Aristocrat Inc. ??? in compliance with the loan agreement.

Application Problem 9-10A Dividend Aristocrat Inc. (DA) borrowed $197,000 from Grow Business Bank to finance the purchase of equipment costing $147,750 and to provide $49,250 in cash. The legal documentation states that the loan matures in 20 years, and the principal is to be paid in annual instalments of $9,850. The terms of the loan also indicate that DA must maintain a current ratio of 1.25 and cannot pay dividends that will reduce retained earnings below 597,000. The 2020 year-end statement of financial position, immediately prior to the bank loan and the purchase of equipment, follows: Current assets Non-current assets $93,800 389,200 Current liabilities Long-term liabilities Common shares Retained earnings Total liabilities and shareholders' equity $70,000 197,000 94,000 122,000 Total assets $483,000 $483,000 Prepare the following statement of financial position assuming the maximum divided is declared and paid. Current Assets Current Liabilities 79,850 Non-current Assets 536,950 Long-term Liabilities 384,150 Common Shares 94,000 97,000 Retained Earnings Total Liabilities and Shareholder's Equity Total Assets 655,000 $ Calculate the current ratio using the updated statement of financial position. (Round answer to 2 decimal places, e.g. 7.25.) Current Ratio Dividend Aristocrat Inc. in compliance with the loan agreement