Question

McConnell Corp. has a book value of equity of $13,480. Long-term debt is $8,750. Net working capital, other than cash, is $3,605. Fixed assets are $17,930 and current liabilities are $1,850.

Required:
a. How much cash does the company have?
b. What is the value of the current assets?

Answer 1

1. $695

2.$6,150

Step-by-step explanation:

1. Calculation of How much cash does the company have.

The total liabilities and equity of the company will be the net book worth in addition with the current liabilities as well as long-term debt.

Hence,

Total liabilities and equity = $13,480 + 1,850 + 8,750

Total liabilities and equity = $24,080

The of $24,080 is equal to the total assets of the company because the total assets are the Total of all assets in which cash is an asset. Therefore the cash account must be equal to total assets less all other assets.

Hence,

Cash = $24,080 – 17,930 – 3,605 – 1,850

Cash = $695

2. Calculation of the value of the current asset

The total of the Net Working Capital will be:

Net Working Capital = $695 + $3,605

Net Working Capital = $4,300

Calculation of the total current assets using the Net Working Capital equation.

Net Workingg Capital = CA – CL

$4,300 = CA – $1,850

CA = $6,150