Question

Complete the following balance sheet using the information:                                    

Cash

Accounts Receivables Inventory ________

Current Assets _________

Net Fixed Assets $1,000,000 _________

Total $1,300,000 =========

Current Ratio = 3.0

Inventory Turnover = 10.0

Debt Ratio = 30%

Accounts Payables                         $100,000

Long-term Debt

Total Liabilities

Common Equity

                                                           ________

Total                                                $1,300,000         

                                                          =========

Total Asset Turnover = 0.5

Average Collection Period = 45 days

Gross Profit Margin = 30%

Answer 1

SOLUTION:

BALANCE SHEET

Assets		Amount ($)	Liabilities		Amount ($)
Cash	154,864		Accounts Payable	100,000
Accounts Receivable	80,136		Long term debt	360,000
Inventory	65,000		Total Liabilities		460,000
Current Assets		300,000	Common Equity		840,000
Net Fixed Assets		1,000,000
Total		1,300,000	Total		1,300,000

Total Asset Turnover = 0.5

Total Asset Turnover = Net Sales / Total average assets

0.5 = Net Sales / 1,300,000

Net Sales = 1,300,000 * 0.5

Net Sales = 650,000

Average Collection Period = 45 days

It is assumed that all sales are on credit.

Average Collection Period = average balance of accounts receivable / total net credit sales * 365

45 = accounts receivalbe / 650,000 * 365

Accounts receivable = 45 * 650,000 / 365

= 80136

Inventory Turnover = 10.0

Inventory Turnover = Net sales / Inventory

10 = 650,000 / Inventory

Inventory = 650,000 / 10

Inventory = 65,000

Cash = 300,000 - 65,000 - 80,136 = 154,864

Debt Ratio = 30%

Debt + Equity = 1,300,000 - 100,000 = 1,200,000

Debt Ratio = Debt / Debt + Equity

0.30 = Debt / 1,200,000

Debt = 0.30 * 1,200,000

Debt = 360,000

Common Equity = 1,200,000 - 360,000 = 840,000