Question

Balance Sheet

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 $2.2 million. It has notes payable of $155,000, long-term debt of $746,000, and total common equity of $1.45 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.

1. What is the company's total debt?
     $
2. 
   
3. What is the amount of total liabilities and equity that appears on the firm's balance sheet?
   $  
4. 
   
5. What is the balance of current assets on the firm's balance sheet?
   $  
6. 
   
7. What is the balance of current liabilities on the firm's balance sheet?
   $  
8. 
   
9. 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.]
   $  
10. 
    
11. What is the firm's net working capital?
    $  
12. 
    
13. What is the firm's net operating working capital?
    $  
14. 
    
15. What is the monetary difference between your answers to part f and g?
    $   
    
    What does this difference indicate?
    A The difference indicates Notes payable balance
16. B The difference indicates Accounts payable balance
17. C The difference indicates Current liabilities balance

Answer 1

a.Total Debt : $ 1,150,000.

Total Debt = Total Assets - Common Equity = $ 2,600,000 - $ 1,450,000 = $ 1,150,000.

b. Total Liabilities : $ 1,150,000

Equity : $ 1,450,000

c. Current Assets : $ 400,000

Current Assets = Total Assets - Net Plant and Equipment = $ 2,600,000 - $ 2,200,000 = $ 400,000.

d. Current Liabilities : $ 404,000

( It is assumed that notes payable is short term and hence is part of current liabilities)

e. Accounts Payable and Accruals : $ 249,000

Accounts Payable and Accruals = Total Current Liabilities - Notes Payable = $ 404,000 - $ 155,000 = $ 249,000.

f. Net Working Capital : - $ 4,000

Working Capital = Total Current Assets - Total Current Liabilities = $ 400,000 - $ 404,000 = - $ 4,000.

g. Net Operating Working Capital : $ 151,000.

Net Operating Working Capital = Total Current Assets - Total Spontaneous Liabilities = $ 400,000 - $ 249,000 = $ 151,000.

h. Monetary Difference : $ 155,000.

i. A. the difference indicates Notes Payable balance.