Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data...

Total assets $ 1,850,000

Current ratio 4.2

Acid-test ratio 3.20

Debt to equity ratio 1.5

Required:

Compute the long-term assets for Bronco:

Solutions

Expert Solution

Debt to equity ratio=debt/equity

Hence debt=1.5*equity

Total assets=Total liabilities+Total equity

1,850,000=1.5*equity+equity

equity=1,850,000/(1.5+1)

=$740000

Hence debt=1.5*740000

=$1,110,000

Current ratio=Current assets/Current liabilities

Hence current assets=4.2*Current liabilities

Acid test ratio=(Current assets-inventory)/Current liabilities

3.2=(current assets-170,000)/Current liabilities

3.2*Current liabilities=current assets-170,000

3.2*Current liabilities=4.2*Current liabilities-170,000

Current liabilities=170,000/(4.2-3.2)

=$170000

Hence current assets=(4.2*170000)

=$714000

Total assets=Current assets+Long term assets

Long term assets=1,850,000-714000

=$1,136,000

ekkarill92 answered 1 year ago

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