Final answer:
The current ratio, acid-test ratio, and debt to equity ratio for Culver City Lighting, Inc. are 8.67, 6.19, and 1.10, respectively, which helps evaluate the company's short-term liquidity and long-term solvency.
Step-by-step explanation:
The question pertains to three key financial ratios often used to assess a company's financial health: the current ratio, the acid-test ratio, and the debt to equity ratio. To calculate the current ratio, divide current assets by current liabilities. Based on Culver City Lighting, Inc.'s post-closing trial balance from December 31, 2018, current assets are $62,000 (Cash) + $46,000 (Accounts Receivable) + $52,000 (Inventories) + $22,000 (Prepaid Insurance) = $182,000, and current liabilities are $15,500 (Accounts Payable) + $5,500 (Interest Payable) = $21,000. This gives a current ratio of $182,000 / $21,000 = 8.67.
To calculate the acid-test ratio (also known as the quick ratio), subtract inventories from current assets and then divide by current liabilities. So, the acid-test ratio would be ($182,000 - $52,000) / $21,000 = $130,000 / $21,000 = 6.19.
The debt to equity ratio compares a company's total liabilities to its shareholder equity. Here, total liabilities are $15,500 (Accounts Payable) + $5,500 (Interest Payable) + $130,000 (Note Payable) = $151,000, and shareholder equity is $77,000 (Common Stock) + $60,000 (Retained Earnings) = $137,000. The debt to equity ratio is then $151,000 / $137,000 = 1.10.