In: Accounting
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
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.