Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.5 million and net plant and equipment equals $2.2 million. It has notes payable of $155,000, long-term debt of $752,000, and total common equity of $1.45 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. Enter negative amounts, if any, with a minus sign.

E) 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.]
$  

F) What is the firm's net working capital?
$  

G) What is the firm's net operating working capital?
$  

H) What is the monetary difference between your answers to part f and g?
$  

What does this difference indicate?
-Select One-

The difference indicates Notes payable balance

The difference indicates Accounts payable balance

The difference indicates Current liabilities balance

Answer 1

Answer to Part e)

Total Assets = $2,500,000
Total Assets = Total Liabilities + Stockholders’ Equity
$2,500,000 = Total Liabilities + $1,450,000
Total Liabilities = $1,050,000

Total Liabilities = Accounts Payable and Accruals + Notes Payable + Long Term Debt
$1,050,000 = Accounts Payable and Accruals + $155,000 + $752,000
Accounts Payable and Accruals = $143,000

Answer to Part f)

Net Working Capital = Current Assets – Current Liabilities
Total Assets = Current Assets + Net Plant and Equipment
$2,500,000 = Current Assets + $2,200,000
Current Assets = $300,000

Current Liabilities = Notes Payable + Accounts Payable and Accruals
Current Liabilities = $155,000 + $143,000
Current Liabilities = $298,000

Net Working Capital = $300,000 - $298,000
Net Working Capital = $2,000

Answer to Part g)

Net Operating Working Capital = $300,000 - $143,000
Net Operating Working Capital = $157,000

Answer to Part h)

The monetary difference in answer of Part f and g is due to Notes Payable, because Notes Payable is not an Operational Liabilities.