Homework Answers
Question 18:
Equity + Total liabilities (TL)= Total assets.
Total assets= Fixed assets (FA) + Current Assets (CA)
Therefore, TL= Total assets – Equity = FA + CA- Equity
TL= Current Liabilities (CL) + Long term debt
Therefore, Long term debt= FA+CA-Equity-CL.
Given,
Fixed assets (FA)= $44,085
Current Assets (CA) = $2,135
Current liabilities= $571
Equity= $12,992
Substituting these values,
Total long term debt= $44,085+$2,135-$12,992-$571 = $32,567.
Question 19:
Out of the four approaches, Payback period does not factor Time Value of Money. Hence the answer is option c
Ordinary payback period does not fact factor time value of money for calculation. It is simply the time taken to recover the initial investment, by way of future revenues, in absolute terms.
All other approaches take into account the interest/ discount on periodical cash flows.
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Assets
Liabilities and Owners’ Equity
2017
2018
2017
2018
Current assets
Current liabilities
Cash
$
11,250
$
19,440
Accounts payable
$
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$
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Accounts receivable
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16,080
Notes payable
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Inventory
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Total
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Total
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$
80,400
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$
27,000
$
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Owners’ equity
Common stock and paid-in
surplus
$
48,000
$
48,000
Retained earnings
169,500
327,600
Net plant and equipment
$...
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Sheets
Assets
Liabilities and Owners’ Equity
2017
2018
2017
2018
Current assets
Current liabilities
Cash
$
11,250
$
19,440
Accounts payable
$
30,600
$
49,200
Accounts receivable
11,850
16,080
Notes payable
24,900
31,200
Inventory
39,150
60,240
Total
$
62,250
$
95,760
Total
$
55,500
$
80,400
Long-term debt
$
27,000
$
24,000
Owners’ equity
Common stock and paid-in
surplus
$
48,000
$
48,000
Retained earnings
169,500
327,600
Net plant and equipment
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