Question

In: Finance

Joseph Moore, the CFO of Carla Vista Automotive, Inc., is putting together this year's financial statements....

Joseph Moore, the CFO of Carla Vista Automotive, Inc., is putting together this year's financial statements. He has gathered the following balance sheet information: The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $311,300, retained earnings of $512,159, inventory of $213,000, goodwill and other assets equal to $78,656, net plant and equipment of $714,100, and short-term notes payable of $21,115. It also had accounts receivable of $141,258 and other current assets of $11,223. How much long-term debt does Carla Vista Automotive have?

Long-term debt $

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Expert Solution

Answer :

As per the basic accounting equation

Total Assets – Total Liabilities = Stockholder’s equity

Elaborating the same we have

Current Assets + Net Plant & equipment + Goodwill and other assets - Current Liabilities – Long term debt = Common stock + Retained earnings

As per the information given in the question we have

Current Assets = Cash + Accounts Receivable + Inventory + Other Current assets

= $ 23,015 + $ 141,258 + $ 213,000 + $ 11,223 = $ 388,496

Thus the current assets = $ 388,496

Net Plant & equipment = $ 714,100   ;   Goodwill and other assets = $ 78,656 ;

Current Liabilities = Accounts Payable + Short term Notes Payable

= $ 163,257 + $ 21,115 = $ 184,372

Common stock = $ 311,300    ; Retained Earnings = $ 512,159

Applying the above information in the Accounting equation we have

$ 388,496 + $ 714,100 + $ 78,656 - $ 184,372 - Long term debt = $ 311,300 + $ 512,159

$ 996,880 – Long term debt = $ 823,459

$ 996,880 - $ 823,459 = Long Term Debt

Long Term Debt = $ 996,880 - $ 823,459

Long Term Debt = $ 173,421

Therefore,

Long Term Debt balance of Carla Vista Automotive = $ 173,421.


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