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Brenda's Bar and Grill has total assets of $17.0 million, of which $11.0 million are current assets. Cash makes up 10 percent of the

Brenda's Bar and Grill has total assets of $17.0 million, of which $11.0 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda's gross plant and equipment has a book value of $15.5 million and other long-term assets have a book value of $400,000. What is the balance of inventory and the balance of depreciation on Brenda's Bar and Grill's balance sheet?

a. Inventory = $___

b. Depreciation = $ ____

Expert Solution

a. Inventory is conmputed as follows:

= Total current assets - cash - accounts receivable

= $ 11.0 million - 10% x $ 11.0 million - 40% x $ 11.0 million

= $ 11.0 million - $ 1.1 million - $ 4.4 million

= $ 5.5 million or $ 5,500,000

b. Depreciation is computed as follows:

Assets other than current assets are as follows:

= Total Assets - Current Assets

= $ 17.0 million - $ 11.0 million

= $ 6.0 million

Net Plant and Equipment will be as follows:

=Assets other than current assets - Long term assets

= $ 6,000,000 - $ 400,000

= $ 5,600,000

So, the depreciation will be as follows:

= Gross Plant and Equipment - Net Plant and Equipment

= $ 15,500,000 - $ 5,600,000

= $ 9,900,000

a. Inventory is conmputed as = $ 5.5 million or $ 5,500,000

b. Depreciation is computed as $ 9,900,000

Junaid answered 1 year ago

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