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 million.It has notes payable of $150,000, long-term debt of $750,000, and total common equity of $1.5 million.The firm combines 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.Based on the information above construct a balance sheet and answer the questions below.Your balance sheet should look something like this. fill in the question marks. Current assets Fixed Assets $2,000,000 TOT Assets $2,500,000

Answer 1

Ans.	ASSETS	Amount	LIABILITIES & EQUITY	Amount
	Current assets		Current liabilities:
	Total current assets (a)	500000	Accounts payable and accruals	100000
	Fixed assets:		Notes payable	150000
	Net plant and equipment		Total current liabilities	250000
	Total fixed assets (b)	2000000	Long term debt	750000
			Total liabilities (a)	1000000
			Total common equity (b)	1500000
	Total assets (a+b)	2500000	Total Liabilities & Equity (a+b)	2500000
	*Total current assets = Total assets - Net plant and equipment
		2500000 - 2000000
		500000
	*Total liabilities and equity = Total assets
	*Total liabilities =   Total liabilities and equity - Total common equity
		2500000 - 1500000
		1000000
	*Total current liabilities = Total liabilities - Long term debt
		1000000 - 750000
		250000
	*Accounts payable and accruals   =   Total current liabilities - Notes payable
		250000 - 150000
		100000