Question

Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement:Inventories $150,000Total assets $1,400,000Current ratio 3Acid-test ratio 2.25Debt to equity ratio 1.5Required: Compute the following for Bronco: SHOW YOUR WORKCurrent assetsShareholders' equityNoncurrent assetsLong-term liabilities

Answer 1

Explanation:

a. Current assets = $600000

Current ratio = 3

Current ratio = Current assets ÷Current liabilities = 3

⇒Current assets = 3 Current liabilities

Given that

Quick ratio = 2.25

Also we know that

Quick assets = Quick assets / Current liabilities = 2.25

therefore, Quick assets = 2.25 Current liabilities

Also, Quick assets = Current assets - Inventory

then,

2.25 current liabilities = 3 Current liabilities - $150000

⇒$150000 = 0.75 Current liabilities

Hence,  Current liabilities = $200000

Current assets = 3 Current liabilities

= 3 × $200000

= $600000.

b. Calculating for Shareholders equity we get

Shareholders equity = $560000

We know that ,

Total debt + Total equity = Total assets

Debt to equity ratio = 1.5

Also, Total debt / Shareholders equity = 1.5

Debt = 1.5 Shareholders equity

1.5 Shareholders equity + 1 Equity = $1400000

2.5 Shareholders equity = $1400000

Shareholders equity = $560000.

Now calculating for Non current assests

c. Non Current assets = $800000

Total assets = Current assets + Non current assets

$1400000 = $600000 + Non current assets

Non current assets = $800000.

d. Long term liabilities = $640000.

Total assets = Total liabilities + Shareholders equity

$1400000 = Current liabilities + Long term liabilities + Shareholders equity

$1400000 = $200000 + Long term liabilities + $560000

Long term liabilities = $640000.