Question

BALANCE SHEET The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.6 million and net plant and equipment equals $2.2 million. It has notes payable of $145,000, long-term debt of $753,000, and total common equity of $1.45 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. Enter negative amounts, if any, with a minus sign. a. What is the company's total debt? b. What is the amount of total liabilities and equity that appears on the firm's balance sheet? c. What is the balance of current assets on the firm's balance sheet? d. What is the balance of current liabilities on the firm's balance sheet? e. 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.] f. What is the firm's net working capital? g. What is the firm's net operating working capital? h. What is the monetary difference between your answers to part f and g? What does this difference indicate? -Select

Answer 1

Company's Balance Sheet will look as follows:

Total Assets = $2,600,000 (given in question)

Net Plant & Equipment = $2,200,000 (given in question)

Current Assets = Total Assets - Net Plant & Equipment = $400,000

Total Equity & Liabilities = Total Assets = $2,600,000

Long Term Debt = $753,000 (given in question)

Notes Payable (which is a form of debt instrument) = $145,000 (given in question)

Total Common Equity = $1,450,000 (given in question)

Accounts Payable & Accruals = Total Equity & Liabilities - Long Term Debt - Notes Payable - Total Common Equity = $252,000

Now that we have the whole balance sheet. We can start solving it's parts:

a) Company's total debt = Long term debt + Notes Payable = $898,000

b) Total Equity & Liabilities = Total Assets = $2,600,000

c) Current Assets = Total Assets - Net Plant & Equipment = $400,000

d) Current Liability = Total Equity & Liabilities - Long Term Debt - Total Common Equity = $397,000

e) Accounts Payable & Accruals = Total Equity & Liabilities - Long Term Debt - Notes Payable - Total Common Equity = $252,000

f) Net Working Capital = Current Assets - Current Liabilities = $3,000

g) Net Operating Working Capital = Current Operating Assets - Current Operating Liabilities = Current Assets - Accounts Payable = $148,000

h) Monetary difference between f & g = $145,000

The difference is due to notes payable not being included as a working liability.