Question

Q1. (30 marks) A skeleton of Heuristic Solution's balance sheet appears as follows (amounts in thousands): 1 Balance Sheet $ 1,164 2 3 Total current liabilities Long-term debt Other long-term liabilities $ 253 (a) 555 (6) (C) 4 5 826 Cash Receivables Inventories Prepaid expenses Total current assets Property, plant, and equipment, ner Other assets Total assets 7 185 2,846 (d) Common shares Retained earnings Total liabilities and shareholders' equity 8 1,150 $6.315 $ (0) 9 10 Use the following ratio data to complete Heuristic Solution's balance sheet: a. Debt ratio is 0.52. b. Current ratio is 1.20. c. Acid-test ratio is 0.70 Curn

Answer 1

Solution Parta) Computation of Long term debt Total Liabilities and shareholder's equity = Total assets Total Liabilities and shareholder's equity = $6,315 Now Total current liability + Long term debt + Other long term liabilities + Common shares + Retained earnings = $6,315 $1,164 + (e) + $826 + $185 + $2,846 = $6,315 (e) = $1,294 Hence Long term debt is $1,294 Part b) Computation of Receivables Acid test ratio=0.7 (Cash + Receivables)/Total current liabilities = 0.7 ($253 + (a)}/$1,164 = 0.7 (a)$561.8 Hence receivables is $561.8

partc) Computation of Total current assets Current ratio=1.2 Total current assets/Total current liabilities= 1.2 Total current assets=1.2 x Total current liabilities C=1.2 X Total current liabilities Total current assets=$1,396.8 Part d) Computation of Prepaid expenses Total current assets - cash - receivables- Inventories - Prepaid expenses $1,396.8 - $253 - $561.8 - $555= Prepaid expenses b) =$27 Hence prepaid expenses is $27 Parte) Computation of property, plant and equipment d) = Total assets - Total current Assets d) = $6,315 - $1,396.8 a) =$4,918.2 Hence the property, plant and equipment is $4,918.2

Conclusion Particulars Amount a) $ 561.8 b) 27.0 c) $ 1,396.8 d) $ 4,918.2 e e) $ 1,294.0 lu D.D.O