Question

Given the following financial data, complete the balance sheet below:

Total debt to net worth 1 to 1

Quick ratio 1.5 to 1

Asset turnover 1.5 times

Average collection period 48.67 days

sales/inventory 7.5times

Cash ___________

Receivables ___________
Inventories __________

Net plant ______________

Total assets _____

Notes Payable _________

Long term debt $30,000

Common stock 20,000

Retained earnings 30,000

Total debt & equity

Answer 1

Compute the net worth of the company, using the equation as shown below:

Net worth = Common stock + Retained earnings

                 = $20,000 + $30,000

                 = $50,000

Hence, the net worth of the company is $50,000.

Compute the total debts of the company, using the equation as shown below:

Total debts = Net worth*Debt to net worth ratio

                   = $50,000*1

                   = $50,000

Hence, the total debts of the company is $50,000.

Compute the notes payable, using the equation as shown below:

Notes payables = Total debts – Long-term debts

                        = $50,000 – $30,000

                        = $20,000

Hence, the notes payables is $20,000.

The total assets is the sum of total debts and the total net worth.

Compute the net sales of the company, using the equation as shown below:

Net sales = Total assets*Asset turnover ratio

              = ($50,000 + $50,000)*1.5 times

              = $150,000

Hence, the net sales of the company is $150,000.

Compute the accounts receivables of the company, using the equation as shown below:

Average collection period = 365 days*Receivables/ Net credit sales

   48.67 days = 365 days*Receivables/ $150,000

Rearrange the above-mentioned equation to determine the account receivables as follows:

Receivables = 48.67 days*$150,000/ 365 days

                     = $20,001.369863

Hence, the receivables of the company is $20,001.37.

Compute the inventory of the company, using the equation as shown below:

Inventory = Sales/ Sales to inventory ratio

               = $150,000/ 7.5 times

                = $20,000

Hence, the inventory of the company is $20,000.      

Compute the total current assets of the company, using the equation as shown below:

Quick ratio = (Current assets – Inventory)/ Current liabilities

             1.5 = (Current assets – $20,000)/ $20,000

    $30,000 = Current assets – $20,000

Rearrange the above-mentioned equation to determine the current assets as follows:

Current assets = $30,000 + $20,000

                        = $50,000

Hence, the current assets is $50,000.

Compute the net plant assets, using the equation as shown below:

Net plant assets = Net worth + Total debts – Current assets

                          = $50,000 + $50,000 – $50,000

                           = $50,000

Hence, the net plant assets of the company is $50,000.

Compute the cash balance of the company, using the equation as shown below:

Cash balance = Current assets – Inventory – Receivables

                      = $50,000 – $20,000 – $20,001.37

                      = $9,998.63

Hence, the cash balance of the company is $9,998.63.

Compute the total debt & equity, using the equation as show below:

Total debt & equity = Total debt + Total net worth

                                = $50,000 + $50,000

                                = $100,000

Hence, the total debt & equity is $100,000.