The classified balance sheet and selected income statement data for Shreve, Inc., as of December 31, 2012, are presented next.

Selected Income Statement Data
Gross Profit ......................................................... $273,500
Operating Expenses ............................................. 152,800
Earnings Before Interest and Taxes ..................... 120,700
Interest Expense .................................................. 16,200
Income Tax Expense ............................................ 32,600
Net Income .......................................................... 7 1,900

Requirements
1. Calculate Shreve, Inc.€™s debt ratio and interest coverage ratio as of December 31, 2012. Round to two decimal places.
2. What percentage of Shreve, Inc.€™s assets belong to the stockholders?
3. Would you be willing to extend credit to Shreve, Inc.? Why or whynot?

Transcribed Image Text:

Shreve, Inc. Balance Sheet December 31, 2012 Current Assets: Cash Accounts Receivable Supplies Prepaid Rent Total Current Assets Current Liabilities: 16,000 Accounts Payable 5,000 Salaries Payable S 1,200 2,000 1,000 15,000 19,200 300 Unearned Service Revenue 3.700 Note Payable 25,000 Total Current Liabilities Long-Term Debt: Fixed Assets: Land Equipment Less Accumulated 20,000 140,000 160,000 50,000 Mortgage Note Payable Bonds Payable Total Long-Term Debt $48,000 Depreciation, Equipment 8,000 40,000 Building Less Accumulated Stockholders' Equity: Common Stock Retained Earnings 230,000 20,000 120,800 140,800 Depreciation, Building | Total Fixed Assets Total Assets 25.000 | 205.000 | Total Stockholders' Equity 295,000 Total Liabilities and 320,000Stockholders' Equity S320,000