Question

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventory. The December 31, 2021, balance sheet revealed the following:

Inventory	$	940,000
Total assets	$	3,200,000
Current ratio		2.20
Acid-test ratio		1.20
Debt to equity ratio		1.5

Required:
Determine the following 2021 balance sheet items:

1.Current assets

2.Shareholders' equity

3.Long-term assets

4.Long-term liabilities

Answer 1

Current Assets		$        2,072,530
Shareholders Equity		$            903,176
Long-term assets		$        1,127,470
Long-term liabilities		$        1,354,765

Required 1
Current Ratio =	Current Assets	= 2.20
	Current Liabilities
	Current Assets	= 2.20 * Current Liabilities
Acid-test ratio =	Quick Assets	= 1.20
	Current Liabilities
	Quick Assets	= 1.20 * Current Liabilities
Therefore,
	Current Assets	= 2.20
	Quick Assets	1.20
We know, Quick Assets = Current Assets - Inventory
	Current Assets	= 1.83
	Current Assets - Inventory
	Current Assets	= 1.83
	Current Assets - 940,000
	Current Assets	= 1.83 * (Current Assets - 940,000)
	Current Assets	= 1.83 Current Assets - 1,720,200
	1.83 Current Assets - Current Assets = 1,720,200
	0.83 Current Assets = 1,720,200
	Current Assets	= 1,720,200/0.83
	Current Assets	= $ 2,072,530
Required 2
Current Liabilities =	Current Assets
	2.20
Current Liabilities =	2,072,530
	2.20
Current Liabilities =	$942,059
Debt + Equity          =	Total assets - Current Liabilities
=	3,200,000 - 942,059
Debt + Equity          =	2,257,941
Debt =	2,257,941 - Equity
Debt Equity Ratio =	Debt	= 1.5
	Equity
	Debt	= 1.5 * Equity
	2,257,941 - Equity	= 1.5 Equity
	2,257,941	= 2.5 Equity
	Equity =	2,257,941/2.5
	Equity =	903,176
Required 3
Total Assets		3,200,000
Current Assets		2,072,530
Long Term Assets (3,200,000 - 2,072,530)	1,127,470
Required 4
Long Term Liabilities = Debt = 2,257,941 - Equity
= 2,257,941 - 903,176
= 1,354,765