At the end of the year just completed,Orem Company's total current liabilities were $75,000,and its total long-term liabilities were $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 which of the following?
A) $1,000,000.
B) $1,125,000.
C) $1,225,000.
D) $1,300,000.LTA = 1,300,000 - (100,000 + 75,000)= $1,125,000.

Question

Quizplus · Accepted Answer

We can use the formula for debt-to-equity ratio which is total liabilities/total equity. We can rearrange this formula to solve for total equity which is total assets - total liabilities. Let TE be total equity.
0.30 = (225,000 + 75,000)/TE
TE = 1,000,000
Working capital = current assets - current liabilities
100,000 = CA - 75,000
CA = 175,000
Total assets = Total liabilities + Total equity
Total assets = 1,000,000 + 1,125,000
Total assets = $2,125,000
Therefore, the best choice is B.

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