Question

Joseph Moore, the CFO of Carla Vista Automotive, Inc., is putting together this year's financial statements. He has gathered the following balance sheet information: The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $311,300, retained earnings of $512,159, inventory of $213,000, goodwill and other assets equal to $78,656, net plant and equipment of $714,100, and short-term notes payable of $21,115. It also had accounts receivable of $141,258 and other current assets of $11,223. How much long-term debt does Carla Vista Automotive have?

Answer 1

Solution:

As per the basic accounting equation

Total Assets – Total Liabilities = Stockholder’s equity

Elaborating the same we have

Current Assets + Net Plant & equipment + Goodwill and other assets - Current Liabilities – Long term debt = Common stock + Retained earnings

As per the information given in the question we have

Current Assets = Cash + Accounts Receivable + Inventory + Other Current assets

= $ 23,015 + $ 141,258 + $ 213,000 + $ 11,223 = $ 388,496

Thus the current assets = $ 388,496

Net Plant & equipment = $ 714,100   ;   Goodwill and other assets = $ 78,656 ;

Current Liabilities = Accounts Payable + Short term Notes Payable

= $ 163,257 + $ 21,115 = $ 184,372

Common stock = $ 311,300    ; Retained Earnings = $ 512,159

Applying the above information in the Accounting equation we have

$ 388,496 + $ 714,100 + $ 78,656 - $ 184,372 - Long term debt = $ 311,300 + $ 512,159

$ 996,880 – Long term debt = $ 823,459

$ 996,880 - $ 823,459 = Long Term Debt

Long Term Debt = $ 996,880 - $ 823,459

Long Term Debt = $ 173,421

The Long Term Debt balance of Carla Vista Automotive = $ 173,421