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BALANCE SHEET The assets of Dallas & Associates consist entirely of current asse

ID: 2816760 • Letter: B

Question

BALANCE SHEET

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.9 million and net plant and equipment equals $2.6 million. It has notes payable of $145,000, long-term debt of $745,000, and total common equity of $1.45 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.

Write out your answers completely. For example, 25 million should be entered as 25,000,000. Enter negative amounts, if any, with a minus sign.

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 monetary difference between your answers to part f and g?
$    

What does this difference indicate?

Explanation / Answer

Solution: Information given ::-

Total assets- $29,00,000

Plant & Equipment - $26,00,000

Notes payable - $1,45,000

long term debt- $7,45,000

Common equity- $14,50,000

a) Total debt= long term debt + Notes payable

Total debt = $7,45,000+$1,45,000= $8,90,000

b) Total liabilities and equity= Total assets

Total liabilities and equity =$29,00,000

c)Current assets = Total assets - net plant and equipment

Current assets= $29,00,000-$26,00,000=$3,00,000

d) Current liabilities= Total assets - long term debt- common equity

Current liabilities= 29,00,000-7,45,000-14,50,000=$7,05,000

e) Accounts payables and accruals = Current liabilities - Notes Payable

Accounts Payables and Accruals= $7,05,000-$1,45,000=$5,60,000

f) Net working capital = Current Assets - Current Liabilities

Net working capital = $3,00,000-$7,05,000= -$4,05,000

g) Net Operating working capital = Current assets - Current liabilities + Notes payable

Net operating working capital = $3,00,000- $7,05,000+ $1,45,000= -$2,60,000

h) Monetary difference between part f and g = -$4,05,000- (-$2,60,000)= -$1,45,000

This difference is due to notes payable. Notes payable includes in net operating working capital but does not include in net working capital