ACC305_Week1_Assignment

# ACC305_Week1_Assignment - Week One Assignment E3-14 The...

This preview shows pages 1–3. Sign up to view the full content.

Week One Assignment E3-14 The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2006, balance sheet revealed the following: Inventories \$ 840,000 Total assets \$2,800,000 Current ratio 2.25 Acid-test ratio 1.2 Debt to equity ratio 1.8 Required: Determine the following 2006 balance sheet items: 1. Current assets Current ratio = Current assets ÷ Current liabilities Acid-test ratio = Current assets - Inventories ÷ Current liabilities Current ratio 2.25 - Acid-test ratio -1.20 Inventory ÷ Current liabilities 1.05 If: Inventory ÷ Current liabilities = 1.05 Then: Inventory ÷ 1.05 = Current liabilities So: \$840,000 ÷ 1.05 = \$800,000 If: Current assets ÷ Current liabilities = 2.25 Then: Current assets = Current liabilities × 2.25 So: Current assets = \$800,000 × 2.25 Current assets = \$1,800,000 2. Shareholders’ equity Debt to equity ratio = Total liabilities(TL) ÷ Shareholders’ equity(SE) = 1.8 Then: TL = 1.8(SE) Accounting equation is: Total assets(TA) = Total liabilities(TL) + Shareholders' equity(SE) Then: TL = TA – SE And: TA = \$2,800,000 So: TL = \$2,800,000 – SE

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
If: TL = 1.8( SE) And: TL = \$2,800,000 – SE Then: 1.8(SE) = \$2,800,000 – SE +SE +SE So: 2.8(SE) = \$2,800,000 ÷ 2.8 ÷2.8 SE = \$1,000,000 Shareholders' equity =
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 08/14/2011 for the course ACC 305 taught by Professor B.forde during the Spring '11 term at Ashford University.

### Page1 / 6

ACC305_Week1_Assignment - Week One Assignment E3-14 The...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online