Justin Company Has Total Assets, Liabilities, and Shareholders' Equity of $38,000

question 20

Multiple Choice

Justin Company has total assets, liabilities, and shareholders' equity of $38,000, $17,000, and $21,000, respectively, at the beginning of 2017. At the end of 2017, total assets, liabilities, and shareholders' equity were reported at $32,000, $13,000, and $19,000, respectively. How much additional debt can Justin Company incur and still have its debt/equity ratio remain less than or equal to 1.00?

• A)$10,000
• B)$25,000
• C)$12,000
• D)$24,000

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Definitions:

Maturity Date

The specified date on which the final payment on a loan, bond, or other financial instrument is due and is to be paid in full.

Compound-Interest GIC

A Guaranteed Investment Certificate where the interest is compounded at regular intervals, leading to an increase in the amount earned over time.

Compounded Semiannually

An interest calculation method where the interest is added to the principal twice a year, leading to interest on interest in the subsequent periods.

Compounded Monthly

A method where interest earnings are calculated and added to the principal sum each month, effectively earning interest on the interest from the previous month.