A large decrease in oil prices is an example of: _________
1 answer:
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Answer:
1. Stockholders' equity = $30.5 million;
2. Debt-to-equity ratio = 1.65
3. See explanation
Explanation:
1. Stockholders' equity calculation:
We know, according to the balance sheet equation,
Total Assets = Total liabilities + Stockholders' equity
Given,
Total Assets = $80.7 million
Total liabilities = Current liabilities + long-term liabilities
Total liabilities = $10.7 million + $39.5 million
Total liabilities = $50.2 million.
Therefore, total stockholders' equity = Total assets - Total liabilities
Total stockholders' equity = $80.7 million - $50.2 million
Total stockholders' equity = $30.5 million.
2. We know,
Debt-to-equity ratio =
When a company seeks to measure its financial leverage, that company uses debt-to-equity ratio. It also suggests that how much capital contributed by the creditors.
From requirement 1, we get,
Total liabilities = $50.2 million.
Total stockholders' equity = $30.5 million.
Therefore, Debt-to-equity ratio =
Debt-to-equity ratio = 1.65
3. The journal entry to record the lease agreement -
Debit Lease account $15.7 million
Credit Lease liability $15.7 million
(when the company enters into the lease agreement)