Question

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. The firm has total assets of $2.8 million and net plant and equipment equals $2.5 million. It has notes payable of $155,000, long-term debt of $755,000, 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. Negative values, if any, should be indicated by a minus sign. Round your answers to the nearest dollar, if necessary.

1. What is the company's total debt?

   $ ___

2. What is the amount of total liabilities and equity that appears on the firm's balance sheet?

   $ ____

3. What is the balance of current assets on the firm's balance sheet?

   $ ____

4. What is the balance of current liabilities on the firm's balance sheet?

   $ ____

5. 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.)

   $ ____

6. What is the firm's net working capital? If your answer is zero, enter "0".

   $ ____

7. What is the firm's net operating working capital?

   $ ____

8. What is the monetary difference between your answers to part f and g?

   $ ___

   What does this difference indicate? choose correct ans from below.

   1. current liabilites balance

   2. accounts payable

   3. notes payable

Answer 1

Qa) $1,350,000

Explanation:

Asset = Liabilities + equity

2.80million = liabilities + 1.45 million

Total liabilities = 2.80 million - 1.45 million

= 1,350,000

Qb) $2,800,000

Explanation: Asset should be equal to liabilities + equity, as per the accounting equation.

Asset = liability + equity

Liability + equity = 2,800,000

Qc) $300,000

Explanation:

Current asset = Total asset - fixed asset

= 2,800,000 - 2,500,000

= $300,000

Qd) $595,000

Total liabilities = short term debt + long term debt

1,350,000 = short term debt + notes payable + long term debt

1,350,000 = short term debt + 155,000 + 755,000

1,350,000 = short term debt + 910,000

Short term debt = 1,350,000 - 910,000

= 440,000

Current liabilities = short term debt + notes payable

= 440,000 + 155,000

= 595,000

Qe) $440,000

Explanation:

Account payable= Current liabilities - notes payable

= 595,000 - 155,000

= $440,000