A company's balance sheet showed the following amounts for liabilities and stockholders' equity accounts: Current Liabilities, $50,000; Bonds Payable, $600,000; Long-Term Lease Obligations, $120,000; and Deferred Income Tax Liability, $20,000. Total stockholders' equity was $520,000. What is the debt-to-equity ratio?

Question

Quizplus · Accepted Answer

To calculate the debt-to-equity ratio, we need to divide the company's total liabilities by its total stockholders' equity.
First, let's calculate the total liabilities by adding up all the liabilities listed:
Current Liabilities: $50,000
Bonds Payable: $600,000
Long-Term Lease Obligations: $120,000
Deferred Income Tax Liability: $20,000
Total Liabilities = $50,000 + $600,000 + $120,000 + $20,000
Total Liabilities = $790,000
Next, we have the total stockholders' equity, which is given as $520,000.
Now we can calculate the debt-to-equity ratio:
Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
Debt-to-Equity Ratio = $790,000 / $520,000
Debt-to-Equity Ratio ? 1.52
Therefore, the debt-to-equity ratio is approximately 1.52, which corresponds to option d.

A Company's Balance Sheet Showed the Following Amounts for Liabilities