The assets of Dallas & Associates consist entirely of current assets and net pla
ID: 2616447 • Letter: T
Question
The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.8 million and net plant and equipment equals $2.4 million. It has notes payable of $155,000, long-term debt of $752,000, and total common equity of $1.55 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 amount of total liabilities and equity that appears on the firm's balancesheet? $ ________
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 monetary difference between your answers to part e and f? $ ________
Explanation / Answer
a Total Assets = Total Liabilities + Shareholders' Equity Hence, Total Liabilities + Shareholders' Equity= 2800000 b Assets of Dallas & Associates entirely consist of current assets and net plant and equipment Therefore, Total Assets = Net Plant and Equipment + Current Assets Hence Current Assets = Total Assets - Net Plant and Equipment = 2800000-2400000 = 400000 c Total Liabilities & Shareholder's Equity = Current Liabilities + Long Term Debt +Common Equity Current Liabilities = Total Liabilities & Shareholders' Equity - Long Term Debt - Common Equity = 2800000-752000 -1550000 = 498000 d Current Liabilities = Accounts Payable and Accruals (single item) + Notes Payable Accounts Payable and Accrual = Current Liabilities - Notes Payable = 498000-155000 = 343000 e Net Working Capital= Current Assets - Current Liabilities = 400000-498000 = -98000 f Net Operating Working Capital = Operating Current assets - Operating Current Liabilities Operating Current Liabilties will include on accounts payable and accruals. It will not include notes payable Net Operating Working Capital = 400000-343000 = 57000 7) Monetary difference between e & f = =-98000-57000 = -155000
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