Question

Cullumber Corporation Balance Sheet as of December 31, 2017 Liabilities and Equity: Assets: Cash and marketable securities Accounts payable and accruals Accounts receivable Notes payable 300,000 Inventory Total current assets Total current liabilities Long-term debt $2,000,000 Net plant and equipment Common stock Retained earnings $1,250,000 Total assets Total liabilities and equity $8,000,000 You have the following information: Debt ratio 35 % 40 days DSO Current ratio 2.17 Inventory turnover ratio 4.000 Net sales $2.43 million Cost of goods sold = $1.9340 million Activa

Answer 1

Ans.	CULLUMBER   CORPORATION
	Balance Sheet as of December 31, 2017
	ASSETS	Amount	LIABILITIES & EQUITY	Amount
	Cash and marketable securities	$986,199	Accounts payable and accruals	$500,000
	Accounts receivable	$266,301	Notes payable	$300,000
	Inventory	$483,500	long term debt	$2,000,000
	Total current assets (a)	$1,736,000	Total debt (a)	$2,800,000
			Common stock	$3,950,000
	Net plant and equipment (b)	$6,264,000	Retained earnings	$1,250,000
			Total Equity (b)	$5,200,000
	Total assets (a+b)	$8,000,000	Total Liabilities and Equity (a+b)	$8,000,000
	WORKING   NOTES:
	Debt ratio = Total debt / Total assets
	35% = Total debt / $8,000,000
	Total debt   = $8,000,000 * 35%
	$2,800,000
	Current liabilities = Total debt - Long term debt
	$2,800,000 - $2,000,000
	$800,000
	Total assets = Total liabilities and equity = $8,000,000
	Total liabilities and equity   =   Total debt + Total equity
	$8,000,000 = $2,800,000 + Total equity
	Total equity = $8,000,000 - $2,800,000
	$5,200,000
	*Common stock = Total equity - Retained earnings
	$5,200,000 - $1,250,000
	$3,950,000
	Accounts payable and accruals =   Current liabilities - Notes payable
	$800,000 - $300,000
	$500,000
	Inventory turnover = Cost of goods sold / Inventory
	4 = $1,934,000 / Inventory
	Inventory =   $1,934,000 / 4
	$483,500
	*In the absence of information, we assumed that the number of days in year = 365 days.
	Days sales outstanding   =   Accounts receivables / Sales * No. of days in year
	40 days   =   Accounts receivables / $2,430,000 * 365 days
	Accounts receivables =   $2,430,000 * 40 / 365
	Accounts receivables =   $266,301 (rounded off)
	Current ratio   =   Total currrent assets / Current liabilities
	2.17 = Total current assets / $800,000
	Total current assets =   $800,000 * 2.17
	$1,736,000
	Cash   =   Total current assets - Inventory - Accounts receivables
	$1,736,000 - $483,500 - $266,301
	$986,199
	Net fixed assets = Total assets - Current assets
	$8,000,000 - $1,736,000
	$6,264,000