Question
In: Accounting
The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities,...
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 | $ | 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 2 years agoRelated Solutions
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