Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.8 million and net plant and equipment equals $2.5 million. It has notes payable of $140,000, long-term debt of $745,000, and total common equity of $1.55 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?
The difference indicates Notes payable balance

The difference indicates Accounts payable balance

The difference indicates Current liabilities balance

Answer 1

From the given information, Balance sheet will be

Liabilities		Assets
Notes Payable	140000	Current Asset	300000
Accrual and Accts payeble	365000	Plant and equipment	2500000
Long term debt	745000
Equity	1550000
Total Liablities	2800000	Total Asset	2800000

A. Total Debt = Long term debt+Accrual+ Accounts Payable+Notes Payable

=140000+365000+745000= $1250000

B. Amount of Total Liabilities and equity will be equal to Total Asset =$2800000

C. Current Asset- As given the total asset is comprise of Current asset and net plant and equipment.

thus Current asset = 2800000-2500000= $300000

D. Current Liabilties will be sum of accounts payable and Accruals and notes payable = Total Liablitites- equity-Long term debts

=2800000-1550000-745000= $505000

E sum of accounts payable and Accruals = Total Liablitites- equity-Long term debts-Notes Payable

=2800000-1550000-745000-140000= $365000

F Net Working capital is Current Asset- Current Liabilities= 300000-505000=-205000

G Net Operating Working capital is Net Working capital excluding notes payable

=300000-365000=-$65000

H. the Monetary difference is F and G -= 205000-65000= 140000

and The difference indicates Notes payable balance