Question
In: Finance
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment....
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.6 million and net plant and equipment equals $2.3 million. It has notes payable of $155,000, long-term debt of $749,000, and total common equity of $1.55 million. The firm does have 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.
Write out your answers completely. For example, 25 million should be entered as 25,000,000. Enter negative amounts, if any, with a minus sign.
- What is the company's total
debt?
$ - What is the amount of total
liabilities and equity that appears on the firm's balance
sheet?
$ - What is the balance of current
assets on the firm's balance sheet?
$ - What is the balance of current
liabilities on the firm's balance sheet?
$ - What is the amount of accounts
payable and accruals on its balance sheet? [Hint: Consider this as
a single line item on the firm's balance sheet.]
$ - What is the firm's net working
capital?
$ - What is the firm's net
operating working capital?
$ - What is the monetary
difference between your answers to part f and g?
$
What does this difference indicate?
Solutions
Expert Solution
a). Total Debts = Total Assets - Total Common Equity
Firm's Total Debts = $2.6 million - $1.55 million
=$1.05 million
b). Total Liabilities = Total Debts = $ 1.05 million
Total Equities = Total Common Equity = $1.55 million
c). Current Assets = Total Assets - Net Plant & Equipment
=$2.6 million - $2.3 million
= $0.3 million
d). Current Liabilities = Total Debts - Long-term Debts
=$1.05 million - $0.749 million
= $0.301 million
e). Accounts Payable and Accruals = Current Liabilities - Notes Payable
= $301,000 - $155,000
=$146,000
f). Net Working Capital = Current Assets - Current Liabilities
= $300,000 - $301,000
= -$1000
g). Net Operating Working Capital = Current Assets - Accounts Payable and Accruals
= $300,000 - $146,000
= $ 154,000
h). Monetary difference between your answers to part f and g = -$1000 - $154,000
= $155,000
The monetary Difference indicates = Notes Payable = $155,000
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