At June 1, 2019 Left Company reported assets of $624,000 and liabilities of $447

Question

 At June 1, 2019 Left Company reported assets of $624,000 and liabilities of $447,000. Left Company recorded the following transactions during the month of June:  a. On June 1, the company spent $36,000 cash to purchase a 1-year insurance    policy.  b. The company purchased inventory on account. The cost of the inventory    was $43,000.  c. The company sold common stock to owners in the amount of $26,000.  d. On June 30, Left Company recorded the adjusting entry for the prepaid    insurance that was used up during June.  Calculate Left Company's debt-to-equity ratio at June 30 after the four transactions above have been recorded. Enter your answer as a number with two places after the decimal point (i.e., 6.78).

Explanation / Answer

Particulars Assets "=" Liabilities "+" Equity At June 01 $                  6,24,000 "=" $          4,47,000 "+" $ 1,77,000 a) Cash paid to Purchase of 1 - Year Insurance $                    -36,000 "=" 0 "+" 0 Recorded as advance payment and as current assets $                      36,000 b) Purchase inventory $                      43,000 "=" 43000 "+" $              -   c) Sold of common stock $                      26,000 "=" 0 "+" $     26,000 d) Expenses of $ 36,000/12 months = $                      -3,000 "=" 0 "+" $     -3,000 Closing of the total Assets & Liabiliites $                  6,90,000 $          4,90,000 $ 2,00,000 Debt to Equity Ratio = Total Debt / Total Equity Debt to Equity Ratio = Total Debt = $                  4,90,000 Divide By = "/" By Total Equity= $                  2,00,000 Debt to Equity Ratio = 2.45 Answer = Debt To Equity Ratio = 2.45 : 1

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