Question

The assets of Big Baller Brand consists entirely of current assets and net plant equipment. The firm has total assets of $3.5 million and the net plant equipment equals $2.75 million. It has notes payable of $350,000, long term debt of $825,000 and total common equity of $2 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. a. What is the company's total debt? b. What is the amount of the liabilities and equity that appear on the firm's balance sheet? c. What is the balance of current assets on the firm's balance sheet? d. What is the balance of the current liabilities on the firm's balance sheet? e. What is the firm's net working capital? f. What is the firm's operating working capital? g. What is the amount of accounts payable and accruals on its balance sheet?

Answer 1

a. $825,000

b. $1,175,000

c. $750,000

d. $350,000

e. $3,150,000

f. $2,675,000

g. Accounts payable and accruals

Explanation:

a. Total debt is long term debt $825,000

b. The amount of liability apearing on balance sheet is $1,175,000 ($825,000 + $350,000)

The amount of equity appearing in balance sheet is $2,000,000

c. Current Assets balance on the balance sheet is $750,000 ($3.5m - $2.75m)

the difference of total assets and net plant equipment.

d. Current liabilities to be reported on the balance sheet is $350,000 and the amount of accounts payable and other payable.

e. Net working capital is calculated by taking total assets and then deducting current liabilities from it. $3,150,000 ($3500,000 - $350,000)

f. Operating working capital is calculated by subtracting total liablities from total assets. $2,675,000 ($3,500,000 - $825,000)

g. The amount of accounts payable and accruals is not provided in the question the amount will be reported in the balance sheet.