Q12SE
Question
Traditional Mills’s balance sheet appears as follows (amounts in thousands):
Use the following ratio data to complete Traditional Mills’s balance sheet.
Current ratio is 0.72.
2. Acid-test ratio is 0.36.
Step-by-Step Solution
VerifiedAnswer
Accounts Receivables = $855, Prepaid Expense= $100, Total Current Assets= $1800, Plant Assets, Net= $2710, Long-term Note Payable =$1290, Total Liabilities=$4550, Total Liabilities and Stockholders=$7000
| TRADITIONAL MILLS | |||
Balance Sheet December 31, 2018 | |||
| Assets | $ | Liabilities | $ |
| Cash | 45 | Total Current Liabilities | 2,500 |
| Accounts Receivables | 855 | Long-term Note Payable | 1,290 |
| Merchandise Inventory | 800 | Other Long-term Liabilities | 760 |
| Prepaid Expenses | 100 | Total Liabilities | 4,550 |
| Total Current Assets | 1,800 | ||
| Plant Assets, Net | 2,710 | Stockholders’ Equity | |
| Other Assets | 2,490 | Stockholders’ Equity | 2,450 |
| Total Assets | 7,000 | Total Liabilities and Stockholders’ Equity | 7,000 |
Total asset = Total liabilities and stockholder’s equity
Therefore, total liabilities and stockholder’s equity = $7,000
Total liabilities and stockholder’s equity = Total liabilities + Stockholder's equity
Total liabilities = $7,000 - $2450
= $4,550
Total liabilities = Total current liability + Long term note payable + Other long term liabilities
Long term notes payable =$4,550 - $2,500 - $760
= $1290
Current ratio = Current asset/ Current liabilities
Current assets = 0.72x2500
= $1,800
Total asset = Plant asset + Other asset + Total current asset
Plant asset = $7,000 - $1,800 - $2,490
=$2,710
Acid ratio = (Cash + Investment + Account receivable)/ Current liabilities
Account receivable = $2,500x0.36 - $45
Account receivable = $855
Prepaid expense = Total Current Assets – Inventory – Account Receivable - Cash
= $1800 - $800 - $855 - $45
= $100