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The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities,...

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2018, balance sheet revealed the following: Inventories $ 940,000 Total assets $ 3,200,000 Current ratio 2.20 Acid-test ratio 1.20 Debt to equity ratio 1.5 Required: Determine the following 2018 balance sheet items:

1.Current assets

2.Shareholders' equity

3.Long-term assets

4.Long-term liabilities

business   accounting   
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Answer #1

Answer to Question 1: (Workings)

Question 1 To find current assets, we will use acid test ratio and current ratio, Acid-test ratio = Quick assets/Current liabilities = 1.20 Where as, we can define quick assets as: Quick assets Current assets Inventories Quick assets Current assets $ 940,000 So, we can say, Acid-test ratio Current assets $ 940,000/Current liabilities 1.20 Current ratio: Current assets/Current liabilities 2.20 With the help of the above two equations, we can determine current liabilities: Current liabilities Inventory/(Current ratio Acid-test ratio) 5 Current liabilities $940,000/(2.20 1.20) 6 Current liabilities $940,000/1 7 Current liabilities $940,000

Answer to Question 1 and Question 2 with workings:

We can substitute, current liabilities amount in the current ratio, to determine current assets: Current assets/Current liabilities 2.20 Current assets/940,000 2.20 Current assets 2.20 940,000 Current assets = $ 20,68,000 Answer to Question 1 Current assets 20,68,000 Question 2: Debt to equity ratio Total liabilities/Shareholders equity 1.5 We can reframe this equation, in the following way: Total liabilities + Shareholders equity = Total assets Total liabilities Shareholders equity 32,00,000 Let x equal shareholders equity 1.5x x 32,00,000 x 32,00,000 2.5x x $12,80,000 shareholders equity Answer to Question 2 Shareholders equity12,80,000

Answer to Question 3 and 4 with workings:

Question 3: Non current assets Total assets Current assets Non current assets 32,00,000 20,68,000 Non current assets $ 11,32,000 Answer to Question 3 Non current assets $11,32,000 Question 4: Long term liabilities Total assets Current liabilities - Shareholders equity Long term liabilities 32,00,000 940,000 12,80,000 Long term liabilities $980,000 Answer to Question 4 Long term liabilities 980,000

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