Question

The December 31, 2019, balance sheet for Baird Corporation is presented here. These are the only accounts on Baird’s balance sheet. Amounts indicated by question marks (?) can be calculated using the following additional information:

BAIRD CORPORATION Balance Sheet As of December 31, 2019
Assets
Cash	$	20,000
Accounts receivable (net)		?
Inventory		?
Property, plant, and equipment (net)		295,000
	$	442,000
Liabilities and Stockholders’ Equity
Accounts payable (trade)	$	?
Income taxes payable (current)		20,000
Long-term debt		?
Common stock		301,000
Retained earnings		?
	$	?

Additional Information
Current ratio (at year end)	1.5 to 1.0
Total liabilities ÷ Total stockholders’ equity		70	%
Gross margin percentage		20	%
Inventory turnover (Cost of goods sold ÷ Ending inventory)		12.5	times
Gross margin for 2019	$	318,000

Required

1. Compute the balance in trade accounts payable as of December 31, 2019.
2. Compute the balance in retained earnings as of December 31, 2019.
3. Compute the balance in the inventory account as of December 31, 2019. (Assume that the level of inventory did not change from last year.)

(For all requirements, negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

a.	accounts payable
b.	retained earnings
c.	inventory

Answer 1

a.	Account payable	$78000
b.	Retained earnings	$8400
c.	Inventory	$127200

Gross margin percentage =   Gross profit / Cost of goods sold

20%    =   $318000 / Cost of goods sold

Cost of goods sold = $1,590,000

Inventory turnover   =   Cost of goods sold / Ending inventory

      12.5                        = $1590000 / Ending inventory

Ending inventory      = $1590000 / 12.5

                                    = $127200

Account receivable ( Net ) = Total assets – ( Cash + Inventory + Property and plant )

                                                  = $442000 – ( $20000 + $127200 + $295000 )

                                                  = -$200

Total assets = Total liability

$442,000 = $442,000

Total liability / Total stockholder’s equity   = 70%

$442000 / Total stockholder’s equity      = 70%

Total stockholder’s equity   = $309400

Retained earnings = (Total shareholder’s equity - Common Stock )

                                    = ( $309400 - $301000 )

                                    =   $8400

Current ratio = Current assets / current liability

Current assets = ( Account receivable + Inventory + Cash )

                              = ( -$200 + $127200 + $20000 )

                              = $147000

    1.5   =     $147000 / Current liability

Current Liability = $147000 / 1.5

                              = $98000

Account payable = ( Total current liability - Income tax payable )

                              =   ( $98000 - $20000 )

                             =    $78000

Long term debt = (   Total liability - Shareholders equity – Current liability )

                              = ( $442000 - $309400- $98000 )

                             =    $34600