Question

The Zumwalt Corporation has $1,200,000 in total assets in 2019. Claims are as follows:

             Accruals                                  $100,000

            Accounts Payable                        50,000

            Notes Payable                           150,000

            Long-term Debt                         250,000

            Preferred Stock                          50,000

            Common Stock                            50,000

            Capital in Excess of Par            150,000

            Retained Earnings                     400,000

            Total Claims                           $1,200,000

             Assuming that Zumwalt does not consider Notes Payable to be part of its capital structure, what proportionate allocations does the firm give each component of capital?

      Total Capital = _________________ [Hint: Current Liabilities are NOT part of Capital.]

Percentage of Capital derived from Long-Term Debt = ___________________

Percentage of Capital derived from Preferred Stock = ____________________

   Percentage of Capital derived from Common Stock = ____________________

NOTE: You should assume that the Notes Payable are short term liabilities.

When determining Capital amounts, Retained Earnings and Capital in excess of Par should be included with Common Stock equity.

Be sure to include all relevant amounts in the denominator to arrive at the correct value for Total Capital

Answer 1

Particular	Amount	Proportion Amount / Capital Employed
Long-term Debt	$        250,000	27.78%
Preferred Stock	$          50,000	5.56%
Common Stock	$          50,000	5.56%
Capital in Excess of Par	$        150,000	16.67%
Retained Earnings	$        400,000	44.44%
Capital Employed	$        900,000	100.00%

Percentage of Capital derived from Long-Term Debt =	27.78%
Percentage of Capital derived from Preferred Stock =	5.56%
Percentage of Capital derived from Common Stock =	66.67%
(5.56+16.67+44.44)
Total	100.00%