Question

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 $2.5 million. It has notes payable of $150,000, 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.

1. What is the company's total debt?
     $
2. 
   
3. What is the amount of total liabilities and equity that appears on the firm's balance sheet?
   $  
4. 
   
5. What is the balance of current assets on the firm's balance sheet?
   $  
6. 
   
7. What is the balance of current liabilities on the firm's balance sheet?
   $  
8. 
   
9. 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.]
   $  
10. 
    
11. What is the firm's net working capital?
    $  
12. 
    
13. What is the firm's net operating working capital?
    $  
14. 
    
15. What is the monetary difference between your answers to part f and g?
    $  
    
    What does this difference indicate?

Answer 1

	Balance Sheet (Draft)
	Liabilities	Amount (in $)	Assets	Amount (in $)
	Notes Payable	$       1,50,000	Net Plant & Equipment	$ 25,00,000
	Long term debt	$       7,45,000
	Accounts Payable & Accruals	?	Current Assets	?
	Common Equity	$      14,50,000
	Total	$      29,00,000	Total	$ 29,00,000
a	Company's Total debt
	Long term debt
	$                         7,45,000
b	Amount of total liabilities
	Notes Payable + long term debt + accounts payable and accruals
	$                        14,50,000
	Equity
	$                        14,50,000
c	Balance of current assets
	Current assets= Total Assets - Net Plant & Equipment
	= $2900000-$2500000
	= $400000
d	Balance of current liabilities
	Notes Payable + Accounts payable
	$                         7,05,000
e	Accounts Payable & Accruals= Total liabilities - Notes Payable - Long term debt
	= $2900000 - $150000-$745000-1450000
	= $555000
f	Net working Capital
	Current Assets - Current liabilities
	- $ 3,05,000
g	Net operating working Capital
	Operating Current Assets - Operating Current liabilities
	$400000 - $555000
	- $ 1,55,000
h	Monetary diff part f and g
	$ 1,50,000
i	The difference indicates the amount of notes payable