Question

Problem 2-17 Balance Sheet (LG2-1)

Mikey's Bar and Grill has total assets of $23 million, of which $17 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Mikey's gross plant and equipment has a book value of $18.5 million, and other long-term assets have a book value of $400,000.

What is the balance of inventory and the balance of depreciation on Mikey’s Bar and Grill’s balance sheet? (Enter your answers in millions of dollars rounded to 1 decimal place.)

Answer 1

Total assets = $23 million

Current assets = $17 million

Cash = 10% of current assets => $17 million * 10% => $1.7 million

Accounts receivable = 40% of current assets => $17 million * 40% => $6.8 million

Current assets = Cash + Accounts receivable + Inventory + Other current assets(assumed 0 as no info is given)

17 million = 1.7 million + 6.8 million + Inventory

=> Inventory = $8.5 million

Non-current assets = Total assets - Current assets

Non-current assets = 23 million - 17 million => $6 million

Non-current assets = Property, plant and equipment(net) + Other long-term assets

6 million = Property, plant and equipment(net) + 0.4 million

Property, plant and equipment(net) => $5.6 million

Property, plant and equipment(net) = Gross Property, plant and equipment - Accumulated Depreciation

5.6 million = 18.5 million - Accumulated Depreciation

=> Accumulated Depreciation = $12.9 million