Why Choose Us?
0% AI Guarantee
Human-written only.
24/7 Support
Anytime, anywhere.
Plagiarism Free
100% Original.
Expert Tutors
Masters & PhDs.
100% Confidential
Your privacy matters.
On-Time Delivery
Never miss a deadline.
The current asset section of the Excalibur Tire Company's balance sheet consists of cash, marketable securities, accounts receivable, and inventory
The current asset section of the Excalibur Tire Company's balance sheet consists of cash, marketable securities, accounts receivable, and inventory. The December 31, 2021, balance sheet revealed the following: Inventory Total assets Current ratio Acid-test ratio Debt to equity ratio $ 850,000 $2,900,000 2.60 1.60 1.9 Required: Determine the following 2021 balance sheet items: 1. Current assets 2. Shareholders' equity 3. Long-term assets 4. Long-term liabilities
Expert Solution
|
|
||
|
1 |
Current Assets |
$ 2,210,000 |
|
2 |
Shareholders' equity |
$ 1,000,000 |
|
3 |
Long-term Assets |
$ 690,000 |
|
4 |
Long-term Liabilities |
$ 1,050,000 |
Working Notes:
Calculation of Shareholders’ equity and total outside liabilities
Debt equity Ratio = Total outside liabilities/ Shareholders Equity
1.9 = Total outside liabilities/ Shareholders Equity
1.9 Shareholders’ equity = Total outside Liabilities ……. Equation 1
Total Assets = Total outside Liabilities + Shareholders’ equity ……… Equation 2
Replacing the value of Shareholders’ Equity in from Equation 1 in Equation 2 we get
Total Assets = 1.9 Shareholders’ Equity + Shareholders’ Equity
$ 2,900,000 = 2.9 Shareholders’ equity
Shareholders’ Equity = $ 2,900,000/ 2.9
= $ 1,000,000
Therefore the value of shareholders’ equity is $ 1,000,000.
Putting the value of Shareholders’ Equity in Equation 1 we get,
1.9 Shareholders’ equity = Total outside Liabilities
1.9 X $ 1,000,000 = Total outside Liabilities
Total Outside Liabilities = $ 1,900,000
Therefore the value of total outside liabilities is $ 1,900,000.
Calculation of Current Assets and Current Liabilities
Current Ratio = Current assets/ Current Liabilities
2.60 = Current Assets/ Current Liabilities
2.60 Current Liabilities = Current Assets ….. Equation 3
Acid-test ratio = Liquid Assets/ Current Liabilities
Acid-test ratio = (Current assets – Inventory)/ Current Liabilities
1.60 = (Current assets - $ 850,000)/ Current Liabilities
1.60 Current Liabilities = Current Assets - $ 850,000 …………….. Equation 4
Putting the value of Current assets from Equation 3 in Equation 4 we get
1.60 Current Liabilities = 2.60 Current Liabilities - $ 850,000
$ 850,000 = 2.60 Current Liabilities – 1.60 Current Liabilities
Current Liabilities = $ 850,000
Therefore the value of Current Liabilities is $ 850,000.
Putting the current liabilities in equation 3 we get
2.60 Current Liabilities = Current Assets
2.60 X $ 850,000 = Current Assets
Current Assets = $ 2,210,000
Therefore the value of current assets is $ 2,210,000.
Calculation of Long term Assets and Long term Liabilities
Long Term Assets = Total Assets – Current Assets
= $ 2,900,000 - $ 2,210,000
= $ 690,000
Therefore the value of long term assets is $ 690,000.
Long Term Liabilities = Total Outside Liabilities – Current Liabilities
= $ 1,900,000 - $ 850,000
= $ 1,050,000
Therefore the value of long term Liabilities is $ 1,050,000.
Archived Solution
You have full access to this solution. To save a copy with all formatting and attachments, use the button below.
For ready-to-submit work, please order a fresh solution below.
