In: Finance
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 | $ |
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.