Using the following information, complete the Balance Sheet:?
Question:
Long term debt to equity0.5 to 01
Total assets turnover 2.5 times
Average collection period* 18 days
Inventory turnover 9 times
Gross profit margin 10%
Acid-test ratio01 to 01
*Assume a 360-days year and all sales on credit.
CashRs. _________Notes and payables Rs. 100,000
Accounts receivableRs. _________Long- term debtRs. ________
Inventory Rs. _________Common stock Rs. 100,000
Plant and equipmentRs. _________Retained earningsRs. 100,000
Total assets Rs. _________Total Liabilities and shareholder’s equity Rs. ________
Note:
Calculate the above missing figures along with working for each.
L-T debt to equity is 0.5 to 1
Since equity is 100,000, L-T debt is 50,000
From here we can get Total Liab + shareholders' equity = 50,000 + 100,000 (notes + payables) + 100,000 (stock) + 100,000 (Retained earnings) = 350,000
That means Total assets must also = 350,000
Total assets t/o = Sales/Ave total assets = 2.5
So Sales/350,000 = 2.5
Sales = 875,000
GP margin = (Sales - COGS)/Sales = 0.10
(875,000 - COGS)/875,000 = 0.10
COGS = 787,500
Inventory t/o = COGS/Ave inventory = 9
787,500/inventory = 9
Inventory = 87,500
Collection period = AR/(Sales/360) = 18
AR/(875,000/360) =18
AR = 43,750
Acid test ratio is 1 to 1
Acid test ratio = (AR + Cash)/Notes + payables = 1 to 1
So AR + cash = 100,000
Cash = 100,000 - 43,750 = 56,250
Current assets = Inventory + AR + Cash = 187,500
Plant/equipment = Total assets - Current assets
= 350,000 -187,500 = 162,500
Balance sheet -
Non-current assets
Plant & equipment 162,500
Current assets
Inventory 87,500
AR 43,750
Cash 56,250
Sub-total 187,500
TOTAL ASSETS 350,000
Liabilities & Shareholders' Equity
Long-term debt 50,000
Current liab
Notes & payables 100,000
Shareholders' equity 100,000
Retained earnings 100,000
TOTAL LIAB & SHAREHOLDERS' EQUITY 350,000
Sales 875,000
COGS 787,500
1222
4445 and 4558
4552
7888
4444 and 1254
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