Complete the balance sheet and sales information that follows using the followin

Question

Complete the balance sheet and sales information that follows using the following financial data:
Debt ratio: 60%
current ratio: 1.6x
Total assets turnover: 2.3x
Days sales outstanding: 34 days (calculation is based on a 365- day year)
Gross profit margin on sales: (sales- cost of goods sold)/sales = 25%
inventory turnover ratio: 5x

A. Cash
B. Accounts payable
C. Accounts receivable $96,411.08
D. Inventories $207,000
E. Common stock
F. Fixed assets
G. Total liabilities and equity
H. Sales $1,035,000
I. Cost of goods sold $776,250
J. Total assets $450,000
K. Long-term debt $67,500
L. Retained earnings $121,500

Explanation / Answer

This is a long one, but here we go! So what I would do first is look at my ratios. Based on what we are given, on two of the ratios are not explicitly already given via the data provided: Debt Ratio and Current Ratio. Every other ratio can be found with data already presented by the problem. Lets work through each ratio and see what it can tell us: Debt ratio = (total debt liabilities)/(total assets). We know total assets are $450,000, we know our ratio is 60% and we also know that there are only two debt liabilities given, Long Term Debt and Accounts Payable. Our formula is now (LTD + A/P)/(TA) = our debt ratio of 60%. All we did is replace total debt liabilities with LTD and A/P. We know LTD is 67,500, we know TA are 450,000 so we solve for A/P and we get 202,500. Now that we have A/P (which happens to be a Current Liability) we can solve our Current Ratio. Current Ratio = (CA)/(CL). Our CA's are cash, Accounts Receivable, and Inventory. Our CL is just our Accounts Payable. So our equation is: (Cash+96411.08+207000)/(202500) = 1.6 So we can solve for cash which happens to be 20588.92. Now that we know all our Current Assets we can find our only NonCurrent Asset, Fixed Assets. Recall that our Total Assets = Current Assets + Fixed Assets. Since we just found all three of our CA, and we are given our Total Assets, we just plug and chug again. (Cash + A/R + Inv) + FA = TA Which is (20588.92+96411.08+207000) + FA = 450000. That means FA = 126000. Finally, our last account we need to find is Common Stock. Recall that Assets = Liab + SE. The two Shareholders Equity accounts are CS and Retained Earnings. We are given RE so we need to find CS. TA = 450,000 and TL = Accounts Payable + LTD Debt. TA = (A/P + LTD) + (CS + RE) So 450,000 = 270,000 + (CS+121,500) so CS equals 58500. Just to double check I often write out the entire balance sheet to make sure everything balances: Cash $20,588.92 A/R $96,411.08 Inv $207,000.00 CA $324,000.00 Fixed Assets $126,000.00 TA $450,000.00 A/P $202,500.00 LTD Debt $67,500.00 TL $270,000.00 CS $58,500.00 RE $121,500.00 Total Equity $180,000.00 Liab & SE $450,000.00 Hope this helps!

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