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Gamez, Eileen Week 1 ACC305 - E 3-18 The current asset...

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E3-18 The current asset section of the Excalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2011, 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 2011 balance sheet items: CALCULATIONS: Current ratio: 2.25 = $1,800,000 (current assets) / $800,000 (current liabilities) Acid-Ratio test = 1.2 = $960,000 (quick assets) / $800,000 (current liability) Debt to equity - $1,800,000 (total liability) / $1,000,000 (share holder’s equity) 2.25 – 1.2 = 1.05 $840,000 / 1.05 = $800,000 (current liability) $800,000 x 2.25 = $1,800,000 (current assets) $2,800,000 (total assets) - $1,800,000 (current assets) = $1,000,000 (noncurrent assets) $1,800,000 (current assets) - $800,000 (current liability) = $1,000,000 (shareholders’ equity) $1,800,000 (total liability) - $800,000 (current liability) = $1,000,000 1. Current assets = $1,800,000 2. Shareholders’ equity = $1,000,000 3. Non-current assets = $1,000,000
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4. Long-term liabilities = $1,000,000 E3-20 Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately
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