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In: Accounting

The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities,...


Inventory	$	910,000
Total assets	$	3,000,000
Current ratio		2.60
Acid-test ratio		1.30
Debt to equity ratio		1.5

Required:
Determine the following 2021 balance sheet items:

current assets:

shareholders' equity:

long-term assets:

long-term liabilities:

please show work for better understanding

Solutions

Expert Solution

Answer:

current assets: $1820000

shareholders' equity: $1200000

long-term assets: $1180000

long-term liabilities: $1100000

Explanation:

Step 1:

Current Ratio = 2.60

Current Asset / Current Laibilities = 2.60

Current Asset = 2.60 Current Liabilities

Step 2:

Acid Test Ratio = (Current Asset - Inventory) / Current Liabilities

1.30 = (2.60 current liabilities - $910000) / Current Liabilities

1.30 Current liabilities = 2.60 current liabilities - $910000

2.60 current liabilities - 1.30 Current liabilities = $910000

1.30 Current liablities = $910000

current liabilities = $910000 / 1.3 = $700000

Current Asset = 2.60 x $700000 = $1820000

Step 3:

Total Asset = $3000000

Current Asset = $1820000

Long term assets = Total Asset - Current Asset = $3000000 - $1820000 = $1180000

step 4:

Debt to equity = 1.5

Total Debt / Equity = 1.5

Total Debt = 1.5 x Equity

Total Asset = Total Debt + Total shareholder's equity

$3000000 = 1.5 Equity + Equity

shareholder's Equity = $3000000 / 2.5 = $1200000

Total Debt = $1200000 x 1.5 = $1800000

Total Debt = Long term liability + Current liability

$1800000 = Long term liability + $700000

longterm liability = $1800000 - $700000 = $1100000.

ekkarill92 answered 1 year ago

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