At the beginning of the current year, Taunton Company'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 owner withdrawals of $5,000. There were no other changes in owner's capital during the year and total assets at the end of the year were $260,000. Taunton 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) Cannot be determined from the information provided.

Question

Quizplus · Accepted Answer

Beginning Owner's Equity = Total Assets - Total Liabilities 
Beginning Owner's Equity = $248,000 - $175,000 = $73,000

Net Income = Total Revenues - Total Expenses 
Net Income = $93,000 - $76,000 = $17,000

Ending Owner's Equity = Beginning Owner's Equity + Net Income - Owner Withdrawals
Ending Owner's Equity = $73,000 + $17,000 - $5,000 = $85,000

Total Liabilities at the end of the year = Total Assets at the end of the year - Ending Owner's Equity
Total Liabilities at the end of the year = $260,000 - $85,000 = $175,000

Debt Ratio = Total Liabilities / Total Assets
Debt Ratio = $175,000 / $260,000 = 0.673 or 67.3%

Therefore, the answer is B) 67.3%.

At the Beginning of the Current Year, Taunton Company's Total