Question

, is putting together this year's financial statements. He has gathered the following balance sheet information: The firm had a cash balance of $23,015, accounts payable of $163,257, common stock of $311,900, retained earnings of $512,159, inventory of $214,500, goodwill and other assets equal to $78,656, net plant and equipment of $714,100, and short-term notes payable of $21,115. It also had accounts receivable of $141,258 and other current assets of $11,223. How much long-term debt does Blossom Automotive have?

Answer 1

Answer:

Blossom Automotive have long-term debt of $174,321.

Explanation:

This can be estimated using the following accounting equation:

Total Assets = Shareholders' equity + Total liabilities ............... (1)

Where;

Total Assets = cash balance + inventory + goodwill and other assets + net plant and equipment + accounts receivable + other current assets = $23,015 + $214,500 + $78,656 + $714,100 + $141,258 + $11,223 = $1,182,752

Shareholders' equity = common stock + retained earnings = $311,900 + $512,159 = $824,059

Short-term liabilities = accounts payable + short-term notes payable = $163,257 + $21,115 = $184,372

Total liabilities = Short-term liabilities + long-term debt = $184,372 + long-term debt

Substituting the relevant values into equation (1) and solve for long-term debt, we have:

$1,182,752 = $824,059 + $184,372 + long-term debt

long-term debt = $1,182,752 - $824,059 - $184,372

long-term debt = $174,321

Therefore, Blossom Automotive have long-term debt of $174,321.