Question

1. What is the net change (net purchase or sale) in Property, Plant and Equipment account in 2018 given the following information?

2017 Net Property, Plant and Equipment Balance = 14,300,000

2018 Net Property, Plant and Equipment Balance = 12,850,000

2018 Total Accumulated Depreciation Balance = 5,650,000

2018 Depreciation Expense = 1,150,000

Group of answer choices

a. 1,450,000 net purchase

b. 1,450,000 net sale

c. 300,000 net purchase

d. 300,000 net sale

2. Using the balance sheet accounts below, what is the firm's Long Term Debt Ratio?

Cash = 12,300,000

Accounts Receivable = 6,700,000

Inventory = 5,000,000

Fixed Assets = 21,000,000

Current Portion of Long Term Debt = 3,900,000

Accounts Payable = 1,700,000

Long Term Bonds = 29,000,000

Common Stock = 6,000,000

Retained Earnings = 4,400,000

Group of answer choices

a. 73.60%

b. 76.89%

c. 75.98%

d. 64.44%

Answer 1

1]

2018 gross fixed assets = 2018 net fixed assets + 2018 accumulated depreciation balance

2018 gross fixed assets = 12,850,000 + 5,650,000 = 18,500,000

2017 gross fixed assets = 2017 net fixed assets + 2017 accumulated depreciation balance

2017 accumulated depreciation balance = 2018 accumulated depreciation balance - 2018 depreciation expense

2017 accumulated depreciation balance = 5,650,000 - 1,150,000 = 4,500,000

2017 gross fixed assets = 14,300,000 + 4,500,000 = 18,800,000

The gross fixed assets have decreased from 2017 to 2018. Hence, there was a net sale of fixed assets.

Net sale amount =  18,800,000 - 18,500,000 = 300,000

2]

long term debt ratio = long term debt / total assets

long term debt = long term bonds

total assets = cash + AR + inventory + fixed assets

total assets = 12,300,000 + 6,700,000 + 5,000,000 + 21,000,000 = 45,000,000

long term debt ratio = 29,000,000 / 45,000,000 = 64.44%