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BALANCE SHEETS: 2016 2017 Assets:                         Cash             &nbs

BALANCE SHEETS: 2016 2017

Assets:

                        Cash                                        120,000                       160,000

                        Accounts Receivable               520,000                       620,000

                        Inventory                                305,000                       290,000

                        Fixed Assets, net                    410,000                       510,000

                        Total Assets                           1,355,000                    1,580,000

Liabilities and Equity:

                        Accounts Payable                   350,000                       $375,000

                        Long-term Debt                      500,000                       625,000

                        Common Stock                       50,000                         75,000

                        Retained Earnings                   455,000                       505,000

                        Total Liabilities and Equity    1,355,000                    1,580,000

INCOME STATEMENT:

            Revenue                                                                                  3,500,000

            Cost of Goods Sold                                                                2,275,000

            General and Administrative                                                    515,000

            Depreciation Expense                                                             120,000

            Earnings Before Interest and Taxes                                        590,000

            Interest Expense                                                                     40,000

            Pretax Net Income                                                                  550,000

            Income Taxes                                                                          167,000

            Net Income                                                                             383,000

  1. An appraiser recently valued Gannon’s fixed assets at $600,000 and determined that $40,000 of their accounts receivable was non-collectible. Based on only this information and the balance sheet above, what was the market value of Gannon’s shareholders’ equity at the end of 2017?
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Answer #1

Market value of Gannon’s shareholders’ equity at the end of 2017

Market value of shareholders’ equity at the end of 2017 = Cash + Accounts Receivables + Inventory + Fixed Assets – Accounts Payable – Long-term Debt

= $160,000 + [$620,000 - $40,000] + $290,000 + $600,000 - $375,000 - $625,

= $160,000 + $580,000 + $290,000 + $600,000 - $375,000 - $625,

= $630,000

“Therefore, the Market value of Gannon’s shareholders’ equity at the end of 2017 would be $630,000”

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