Question

• The assets of the Bermuda Corporation consist exclusively of Net Property, Plant and Equipment (PPE), and Current Assets.
• The firm has the total Assets of $50,000, while its Gross PPE equals $40,000 with the Depreciation of $10,000.
• It has the Notes Payable of $5,000, in addition to the Long-Term Debt of $15,000, and the Common Equity of $25,000.
• The company finances its needs with debt and common equity and does not have preferred stock on its balance sheet.

1. Calculate the amount of total liabilities and equity on the firm’s balance sheet.                                                      (1 point)

2. Calculate the balance of current assets on the firm’s balance sheet.                                                                         (1 point)

3. Calculate the balance of current liabilities on the firm’s balance sheet.                                                                   (1 point)

4. Calculate the amount of accounts payable and accruals on the firm’s balance sheet (provided they are listed under one account).                                                                                                                                                                                           (1 point)

Calculate the firm’s net operating working capital.  

with step pleas

Answer 1

First of all We have to find :-

Net Property, Plant and Equipment(PPE) = Gross PPE - Accumulated Depreciation

= $40,000 - $10,000

= $ 30,000

Asked:-

1) Calculate the amount of Total Liability and Equity on Firm's Balance sheet

Total Liability = Short term liability + Long Term Liability

Or

Total Liability = Total Assets - Shareholder's Equity

Total Asset = $ 50,000

Shareholder's Equity = The amount of Funds contributed by the owners orshareholders + Retained earings

i.e = $ 25000 Common Equity

Therefore Total Liability = $50,000 -$25,000 = $25,000

Shareholder's Equity = Total Assets - Total Liability

$50,000 - $ 25000 = $ 25,000

2) Calculate the balance of Current Assets on the Firm's Balance Sheet:-

Current Assets = Total Assets - Long term Fixed Assets( Net PPE)

= $ 50,000 - $ 30,000 = $ 20,000

3) Calculate the balance of Current Liabilities on the Firm's Balance Sheet:-

Current Liability = Total Liability - Long Term Liability

= $25,000 - $15,000 = $10,000

4 Calculate the Amount of Accounts Payable and Accruals of the Firm's Balance Sheet:-

Account Payable and Accruals = Total Assets - ( Notes Payable +Long Term Debts+ Common Equity)

= $50,000 - ($5,000 + $15,000 + $25,000)

=$ 50000- $45,000 = $ 5,000

5.Calculate the Firm's Net Operating Working Capital:-

Net Operating Working Capital = Operating Current Assets- Operating Current Liabilities

=$ 20,000 - $10,000 = $10,000