Question

Brenda’s Bar and Grill has current liabilities of $24 million. Cash makes up 10 percent of...

Brenda’s Bar and Grill has current liabilities of $24 million. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda’s current ratio is 2.0 times.

Calculate the value of inventory listed on the firm’s balance sheet. (Enter your answer in millions of dollars rounded to 2 decimal places.)

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Answer #1

Answer:

Current liabilities = $24 million

Current Ratio = 2 times

We know Current Ratio = Current Assets / Current Liabilities

= Current Assets / $24 million = 2

= Current Assets = $24 million * 2 = $48 million

Cash = 10% of Current Assets = $48 million * 10% = $4.80 million

Accounts Receivable = 40% of Current Assets = $48 million * 40% = $19.20 million

Brenda's Value of inventory = Current Assets - Cash - Accounts Receivable (aasuming no other current assets are there)

Value of Inventory = $48 million - 4.80 million - $19.20 million = $24 million

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