Answer:
1. | Current Assets | $2,880,000 |
2. | Shareholders' equity | $1,500,000 |
3. | Long-term assets | $1,320,000 |
4. | Long-term liabilities | $1,500,000 |
Explanation:
Let's write the basic formulas which we require for answering this question.
Current Ratio = Current Assets ÷ Current Liabilities
Acid-test ratio = (Current Assets - Inventories) ÷ Current Liabilities
Debt to Equity Ratio = Total Liabilities ÷ Equity
And also, the basic accounting equation is :
Assets = Equity + Liabilities
Total Assets = $4,200,000 (given)
So Equity + Liabilities must be the same.......(1)
Debt to Equity Ratio = 1.8
i.e., Debt ÷ Equity = 1.8
i.e, Debt = 1.8Equity
Let debt be x and equity be y.
x = 1.8y.......(2)
We know that x+y = $4,200,000
From (2),
1.8 y + y = $4,200,000
2.8y = $4,200,000
y = $4,200,000 ÷ 2.8
= $1,500,000
x = 1.8 * y
= 1.8 * 1,500,000
= $2,700,000
:. Debt = $2,700,000 and Equity= $1,500,000
Given,
Current Ratio = 2.40
Acid test ratio = 1.40
Current Ratio - Acid test ratio = 1
Equation wise,
[ Current Assets - (Current Assets - Inventory) ÷ Current Liabilities = 1
Inventory ÷ Current Liabilities = 1
i.e., Inventory = Current Liabilities
Given, Inventory = $1,200,000
:. Current Liabilities = $1,200,000
Then,
Current Ratio = 2.40
Current Assets ÷ Current Liabilities = 2.40
Current Assets = Current Liabilities * 2.40 = $1,200,000 * 2.4
= $2,880,000
:. Long term Assets = Total Assets - Current Assets
= $4,200,000 - $2,880,000
= $ 13,20,000
Total Debt = $2,700,000
Long term Liabilities = Total Debt - Current Liabilities
= $2,700,000 - $1,200,000
= $1,500,000
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