At the beginning of the current year, Trenton Company Inc.'s total assets were $248,000 and its total liabilities were $175,000. During the year, the company reported total revenues of $93,000, total expenses of $76,000 and dividends of $5,000. There were no other changes in stockholders' equity during the year and total assets at the end of the year were $260,000. Trenton Company's debt ratio at the end of the current year is:
A)70.6%.
B)67.3%.
C)32.7%.
D)48.6%.
E)1.42%.

Question

Quizplus · Accepted Answer

Debt ratio = (total liabilities / total assets) x 100
At the beginning of the year, the debt ratio was:
(175,000 / 248,000) x 100 = 70.56%
During the year, the net income was:
$93,000 - $76,000 = $17,000
Since there were no other changes in stockholders' equity, the ending stockholders' equity was:
$260,000 - $17,000 - $5,000 - $248,000 = $10,000
Total liabilities at the end of the year were:
$260,000 - $10,000 = $250,000
Therefore, the debt ratio at the end of the year was:
($250,000 / $260,000) x 100 = 67.3%

At the Beginning of the Current Year, Trenton Company Inc