At the end of the year just completed,Orem Company's current liabilities totalled $75,000,and its long-term liabilities totalled $225,000.Working capital at year-end was $100,000.If the company's debt-to-equity ratio is 0.30 to 1,total long-term assets must equal:
A) $1,000,000.
B) $1,125,000.
C) $1,225,000.
D) $1,300,000.

Question

Quizplus · Accepted Answer

First, we can calculate the total liabilities by adding the current and long-term liabilities:
$75,000 + $225,000 = $300,000.

Next, we can use the debt-to-equity ratio to calculate the total equity:
Debt-to-equity ratio = 0.30 to 1.
This means that for every $1 of equity, the company has $0.30 of debt.
So, we can set up the following equation:
Debt/Equity = 0.30
Debt = 0.30 x Equity
$300,000 = 0.30 x Equity
Equity = $1,000,000.

Now, we can use the working capital formula to calculate the total current assets:
Working capital = Current assets - Current liabilities
$100,000 = Current assets - $75,000
Current assets = $175,000.

Finally, we can use the following formula to calculate the total assets:
Total Assets = Total Liabilities + Total Equity
Total Assets = $300,000 + $1,000,000
Total Assets = $1,300,000.

Therefore, the correct answer is B) $1,125,000.

At the End of the Year Just Completed,Orem Company's Current