Given the following data:Dec. 31,Year 2 Dec. 31,Year 1Total liabilities $128,250 $120,000Total owner's equity 95,000 80,000Compute the ratio of liabilities to owner's equity for each year. Round to two decimal places.
A) 1.50 and 1.07, respectively
B) 1.35 and 1.50, respectively
C) 1.07 and 1.19, respectively
D) 1.19 and 1.35, respectively

Question

Quizplus · Accepted Answer

To calculate the ratio of liabilities to owner's equity, we divide total liabilities by total owner's equity.

For Year 1: 
Ratio of liabilities to owner's equity = Total liabilities / Total owner's equity 
= $120,000 / $80,000 
= 1.50

For Year 2: 
Ratio of liabilities to owner's equity = Total liabilities / Total owner's equity 
= $128,250 / $95,000 
= 1.35

Therefore the ratio of liabilities to owner's equity for each year rounded to two decimal places are 1.50 and 1.35 respectively. The answer is B.

Given the Following Data:Dec