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In: Accounting

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

Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement: Inventories $ 170,000

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 2 years ago
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