Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. The firm has total assets of $2.7 million and net plant and equipment equals $2.3 million. It has notes payable of $160,000, long-term debt of $755,000, and total common equity of $1.5 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Negative values, if any, should be indicated by a minus sign. Round your answers to the nearest dollar, if necessary.

1. What is the company's total debt?

   $  

2. What is the amount of total liabilities and equity that appears on the firm's balance sheet?

   $  

3. What is the balance of current assets on the firm's balance sheet?

   $  

4. What is the balance of current liabilities on the firm's balance sheet?

   $  

5. What is the amount of accounts payable and accruals on its balance sheet? (Hint: Consider this as a single line item on the firm's balance sheet.)

   $  

6. What is the firm's net working capital? If your answer is zero, enter "0".

   $  

7. What is the firm's net operating working capital?

   $  

8. What is the monetary difference between your answers to part f and g?

   $  

   What does this difference indicate?

   -Select-The difference indicates Notes payable balance.The difference indicates Accounts payable balance.The difference indicates Current liabilities balance.

Answer 1

a. company's total debt is long-term debt of $755,000.

b. Equity is $1,500,000.

Total liabilities = notes payable + long-term debt + accounts payable and accruals

accounts payable and accruals = Total assets - notes payable - long-term debt - common equity = $2,700,000 - $160,000 - $755,000 - $1,500,000 = $285,000

Total liabilities = $160,000 + $755,000 + $285,000 = $1,200,000

Total liabilities and equity = $1,500,000 + $1,200,000 = $2,700,000

c. current assets = Total assets - net plant and equipment = $2,700,000 - $2,300,000 = $400,000

d. current liabilities = notes payable + accounts payable and accruals = $160,000 + $285,000 = $445,000

e. amount of accounts payable and accruals = Total assets - notes payable - long-term debt - common equity = $2,700,000 - $160,000 - $755,000 - $1,500,000 = $285,000

f. net working capital = current assets - current liabilities = $400,000 - $445,000 = -$45,000

g. net operating working capital = current operating assets - current operating liabilities

current operating assets = cash + accounts receivable + inventory

current operating liabilities = accounts payable + accruals or accrued expenses

net operating working capital = $400,000 - $285,000 = $115,000

h. monetary difference = $45,000 + $115,000 = $160,000

The difference indicates Notes payable balance.