Question
In: Finance
Problem 3-35 Using ratios to construct financial statements [LO3-2] The following information is from Harrelson Inc.'s,...
Problem 3-35 Using ratios to construct financial statements [LO3-2]
The following information is from Harrelson Inc.'s, financial
statements. Sales (all credit) were $25.20 million for last
year.
| Sales to total assets | 1.40 | times |
| Total debt to total assets | 35 | % |
| Current ratio | 2.80 | times |
| Inventory turnover | 6 | times |
| Average collection period | 20 | days |
| Fixed asset turnover | 5 | times |
Complete the balance sheet: (Use a 360-day year. Do not
round intermediate calculations. Input your answers in millions
rounded to 2 decimal places.)
$ in millions $ in millions
Cash _________________ Current Debt _____________
accounts receivable_________ Long-term debt__________
Inventory______________ Total Debt _________
Total Current Assets ___________
Fixed assets______________ Equity _______________
Total Assets ________________ Total Debt and stockholder's equity___________
Solutions
Expert Solution
Ans:
(i) Sales / total assets = 1.4
25.2 / total assets = 1.4
(ii) total assets = 25.2 / 1.4
= $ 18 million
total debt to total assets = 35%
total debt = 35% * total assets
= 35% * 18 million
= 6.3 million
Total assets - total debt = equity
18 - 6.3 = 11.7 = Equity
(iii) fixed assets turnover = 5
Net sales / net fixed assets = 5
25.2 / 5 = net fixed assets
net fixed assets = 5.04 million
(iv) Total current assets = total assets - fixed assets
= 18 million - 5.04 million
= 12.96 million
current ratio = current assets / current liabilities
2.8 = 12.96 / current liabilities
current liabilities = 12.96 / 2.8
= 4,628,571
(v) inventory turnover ratio = net sales / average inventory
6 = 25.2 / inventory
inventory = 4.2 million
(vi) average collection period = 20 days
360 / net sales * average accounts receivable = 20
360 / 20 = net sales / account receivable
account receivable = 25.2 / 18
= 1.4 million
current asset = cash + inventory + account receivable
12.96 = cash + 4.2 + 1.4
cash = 12.96 - 4.2 - 1.4
= 7.36 million
(vii) Total debt - current liabilities = long term debt
6,300,000 - 4,628,571 = 1,671,429
| Cash | 7360000 | Current Debt | 4628571 |
| account receivable | 1400000 | Long term debt | 1671429 |
| inventory | 4200000 | Total debt | 6300000 |
| Total current assets | 12960000 | Equity | 11700000 |
| Fixed assets | 5040000 | ||
| Total assets | 18000000 | Total debt and Equity | 18000000 |
jeff jeffy answered 1 year agoRelated Solutions
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