3-1 BALANCE SHEET The assets of Dallas & Associates consist entirely of current
ID: 2341614 • Letter: 3
Question
3-1 BALANCE SHEET The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.5 million and net plant and equipment equals $2 million. It has notes payable of $150,000, long-term debt of $750,000 and total common equity of $1.5 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 What is the company's total debt? What is the amount of total liabilities and equity that appears on the firm's balance sheet? What is the balance of current assets on the firm's balance sheet? What is the balance of current liabilities on the firm's balance sheet? 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.] What is the firm's net working capital? What is the firm's net operating working capital? What is the explanation for the difference in your answers to parts f and g? a. b. c. d. f. g. h. 6Explanation / Answer
a) Total debt?
Total debt = $750,000 + $150,000 = $900,000.
b) See balance sheet on separate document. We are given that the firm's total assets equal $2,500,000.Since both sides of the balance sheet must equal, total liabilities and equity must equal total assets = $2,500,000.
c) Total assets = Current assets + Net plant and equipment
$2500000 = CA + $2000000
CA = $500,000
d) Total liabilities and equity = Current liabilities + Long-term debt + Total common equity
$2,500,000 = Current liabilities + $750,000 + $1,500,000
Current liabilities = $250,000
e) Current liabilities = Accounts payable and accruals + Notes payable
$250,000= Accounts payable and accruals + $150,000
Accounts payable and accruals= $100,000
f) Net working capital = Current assets - Current liabilities
$500,000 - $250,000 = $250,000
g) Net operating working capital = Current assets - (Current liabilities - Notes payable)
$500,000 - ($250,000 - $150,000) = $400000
h) NOWC - NWC = $400,000 - $250,000= $150,000.
The difference between the two is equal to the notes payable balance
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