The following partial balance sheet is provided for Groome Company: $\begin{array}{|l|r|}
\hline \text { Liabilities and Stockholders' Equity } & \
\hline \text { Accounts payable } & \$ \quad 9,000 \
\hline \text { Salaries payable } & 12,000 \
\hline \text { Bonds payable (Due in 2020) } & 20,000 \
\hline \text { Common stock, no par } & 30,000 \
\hline \text { Retained earnings } & \underline { 54,000} \
\hline \text { Total liabilities and stockholder' equity } &\underline { \$ \quad 125,000} \
\hline
\end{array}$ What is the company's debt to assets ratio (rounded to nearest whole percent)?
A) 49%
B) 16%
C) 33%
D) Cannot be determined with the information given.

Question

The following partial balance sheet is provided for Groome Company: $\begin{array}{|l|r|}
\hline \text { Liabilities and Stockholders' Equity } & \
\hline \text { Accounts payable } & \$ \quad  9,000 \
\hline \text { Salaries payable } &  12,000 \
\hline \text { Bonds payable (Due in 2020) } & 20,000 \
\hline \text { Common stock, no par } & 30,000 \
\hline \text { Retained earnings } & \underline { 54,000} \
\hline \text { Total liabilities and stockholder' equity } &\underline {  \$ \quad 125,000} \
\hline
\end{array}$ What is the company's debt to assets ratio (rounded to nearest whole percent)?
A) 49%
B) 16%
C) 33%
D) Cannot be determined with the information given.

Quizplus · Accepted Answer

The debt to assets ratio is calculated as total liabilities divided by total assets. Total liabilities are $9,000 (Accounts payable) + $12,000 (Salaries payable) + $20,000 (Bonds payable) = $41,000. Total assets can be inferred from the total liabilities and stockholders' equity, which is $125,000. Therefore, the debt to assets ratio is $41,000 / $125,000 = 0.328, or 33% when rounded to the nearest whole percent.

The Following Partial Balance Sheet Is Provided for Groome Company