Question

A scrambled list of accounts from the income statement and balance sheet of​ Belmond, Inc. is found​ here: 

.

Inventory	6,460
Common stock	44,950
Cash	16,580
Operating expenses	1,350
​Short-term notes payable	630
Interest expense	850
Depreciation expense	450
Sales	12,710
Accounts receivable	9,560
Accounts payable	4,760
​Long-term debt	55,420
Cost of goods sold	5,740
Buildings and equipment	122,330
Accumulated depreciation	33,580
Taxes	1,490
General and administrative expense	880
Retained earnings	​?

a.  How much is the​ firm's net working​ capital?

b.  Complete an income statement and a balance sheet for Belmond.

c. If you were asked to respond to parts

​(a​)

and

​(b​)

as part of a training​ exercise, what could you tell your boss about the​ company's financial condition based on your​ answers?

a.  How much is the​ firm's net working​ capital?

The​ firm's net working capital is

​$ ​(Round to the nearest​ dollar.)

Answer 1

a)
Firm's Net Working Capital=Current Assets-Current Liabilities
Current Assets=(A)	$       32,600.00
Current Liabilities=(B)	$          5,390.00
Net Working Capital=(A)-(B)	$       27,210.00
b)
Belmond Inc.
Income Statement
Net sales		$         12,710.00
Cost of goods sold		$           5,740.00
Gross Profit		$           6,970.00
Expenses
Operating Expenses	$          1,350.00
General and Administrative Expenses	$             880.00
Depreciation Expense	$             450.00
Total Expenses =(B)		$           2,680.00
Operating Profit		$           4,290.00
Less: Interest Expense		$             -850.00
Profit before taxes		$           3,440.00
Less: Taxes		$          -1,490.00
Net Income		$           1,950.00
Belmond Inc.
Balance Sheet
Assets
Current Assets
Cash	$       16,580.00
Accounts Receivable	$          9,560.00
Inventory	$          6,460.00
Total Current Assets		$         32,600.00
Fixed Assets
Building and Equipment	$    1,22,330.00
Less: Accumulated Depreciation	$      -33,580.00
Total Fixed Assets		$         88,750.00
Total Assets		$     1,21,350.00
Liabilities
Accounts Payable	$          4,760.00
Short Term notes payable	$             630.00
Total Current Liabilities		$           5,390.00
Long Term Liabilities
Long Term Debts	$       55,420.00
Total Long Term Liabilities		$         55,420.00
Total Liabilities		$         60,810.00
Equity
Common Stock	$       44,950.00
Retained Earnings(balancing figure)	$       15,590.00	$         60,540.00
Total Liabilities and Equity		$     1,21,350.00
Retained Earnings=($121350-$60810-$44950)
c)
Working Capital: It is the difference between current assets and current liabilites.Any Company needs working capital to meets its short term obligations.As per above calculation, company's has sound working capital.
Debt Equity Ratio=Debt/Equity
Debt=(A)	$       60,810.00
Equity=(B)	$       60,540.00
Debt Equity Ratio=(A)/(B)	1.004
Companies Debt is greater than its equity,Companies financial condition is not sound on the basis of debt equity ratio.