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7 June, 21:53

Prepare a balance sheet from the following information. What is the net working capital and debt ratio?

Cash$ 50,000

Accounts receivable 42,700

Accounts payable 23,000

Short-term notes payable 10,500

Inventories 40,000

Gross fixed assets 1,280,000

Other current assets 5,000

Long-term debt 200,000

Common stock 490,000

Other assets 15,000

Accumulated depreciation 312,000

Retained earning?

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  1. 7 June, 23:45
    0
    Net working capital = $104,200

    Debt ratio = 0.21

    Retained earning = $397,200

    Explanation:

    The preparation of the balance sheet is presented below:

    Assets

    Current Assets

    Cash$ 50,000

    Accounts receivable $42,700

    Inventories $40,000

    Other current assets $5,000

    Total current assets $137,700

    Gross fixed assets 1,280,000

    Less: Accumulated depreciation - $312,000

    Net fixed assets $968,000

    Other assets $15,000

    Total assets $1,120,700

    Liabilities

    Current liabilities

    Accounts payable $23,000

    Short-term notes payable $10,500

    Total current liabilities $33,500

    Long-term debt 200,000

    Total liabilities $233,500

    Equity

    Common stock 490,000

    Retained earning $397,200 (Balancing figure)

    Total equity $887,200

    Total liabilities and owners equity $1,120,700

    The computation is shown below:

    Net working capital = Current assets - current liabilities

    = $137,700 - $33,500

    = $104,200

    And, the debt ratio would be

    = Total liabilities : Total assets

    = $233,500 : $1,120,700

    = 0.21
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