CHAPTER 4-11 - excess debt will be: Excess debt = $733,676...

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excess debt will be: Excess debt = $733,676 – 697,080 = $54,596 To make the balance sheet balance, the company will have to increase its assets. We will put this amount in an account called excess cash, which will give us the following balance sheet. MOOSE TOURS INC. Pro Forma Balance Sheet Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 30,360 Accounts payable $ 81,600 Excess cash 54,596 Accounts receivable 44,400 Notes payable 17,000 Inventory 104,280 Total $ 98,600 Total $ 238,076 Long-term debt 216,444 Fixed assets Net plant and Owners’ equity equipment 495,600 Common stock and paid-in surplus $ 140,000 Retained earnings 278,632 Total $ 418,632 Total liabilities and owners’ Total assets $ 733,676 equity $ 733,676 The excess cash has an opportunity cost that we discussed earlier. Increasing fixed assets would also not be a good idea since the company already has enough fixed assets. A likely scenario would be the repurchase of debt and equity in its current capital structure weights. The company’s debt-assets and equity assets are:
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This note was uploaded on 07/15/2010 for the course FINANCE 318 taught by Professor Spurlin during the Spring '08 term at LA Tech.

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CHAPTER 4-11 - excess debt will be: Excess debt = $733,676...

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