Kings of Leon, Inc., has a book value of equity of $64,500.
Long-term debt is $57,500. Net working capital, other than cash, is $22,300. Fixed assets are $92,100 and current
liabilities are $7,300.
Requirement 1:
How much cash does the company have?
(Do not include the dollar sign ($).)
Cash
$
Requirement 2:
What is the value of the current assets?
(Do not include the dollar sign ($).)
Current assets
$
Explanation:
1:
The total liabilities and equity of the company are the net book worth, or value of equity, plus current liabilities and
long-term debt, so:
Total liabilities and equity = $64,500 + 7,300 + 57,500
Total liabilities and equity = $129,300
This is also equal to the total assets of the company. Since total assets are the sum of all assets, and cash is an asset,
the cash account must be equal to total assets minus all other assets, so:
Cash = $129,300 – 92,100 – 22,300 – 7,300
Cash = $7,600
2:
We have NWC other than cash, so the total NWC is:
NWC = $7,600 + 22,300
NWC = $29,900
We can find total current assets by using the NWC equation. NWC is equal to:
NWC = CA – CL
$29,900 = CA – $7,300
CA = $37,200