Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. The firm has total assets of $2.6 million and net plant and equipment equals $2.3 million. It has notes payable of $140,000, long-term debt of $749,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Negative values, if any, should be indicated by a minus sign. Round your answers to the nearest dollar, if necessary.

1. What is the company's total debt?

   $  

2. What is the amount of total liabilities and equity that appears on the firm's balance sheet?

   $  

3. What is the balance of current assets on the firm's balance sheet?

   $  

4. What is the balance of current liabilities on the firm's balance sheet?

   $  

5. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm's balance sheet.)

   $  

6. What is the firm's net working capital? If your answer is zero, enter "0".

   $  

7. What is the firm's net operating working capital?

   $  

8. What is the monetary difference between your answers to part f and g?

   $  

   What does this difference indicate?

Answer 1

Answer with working and explanation is given below

Working notes: Total Assets Net Plant and equipment Current Assets $2,600,000 $2,300,000 $300,000 Total Liabilities and Stockholders equity Less: Long-term debt Common equity Current Liabilities $2,600,000 Equal to Total Assets $749,000 $1,550,000 $301,000 a Total Debt Long term debt Current liabilities Total Debt $749,000 $301,000 $1,050,000 b Total Liabilities and equity $2,600,000 Balance of Current Asset $300,000 d balance of Current liabilities $301,000 e Amount of accounts payable and accruals Total Current Liabilities Less: Notes payable Accounts payable and accruals $301,000 $140,000 $161,000 f Net working capital Current Assets Current Liabilities Net working capital $300,000 $301,000 -$1,000 B g Net Operating working capital Current Assets Less: Accounts payable and accruals Net Operating working capital $300,000 $161,000 $139,000 h Monetary difference $140,000 A-B Difference indicates the notes payable since it is non operating item