Question

1/Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement:

Inventories	$	155,000
Total assets	$	1,430,000
Current ratio		3.3
Acid-test ratio		2.30
Debt to equity ratio		1.6

Required:
Compute the long-term assets for Bronco:

Long-term assets

2/ Bronco Electronics' current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement:

Inventories	$	170,000
Total assets	$	1,520,000
Current ratio		3.7
Acid-test ratio		2.45
Debt to equity ratio		1.5

Required:
Compute the long-term liabilities for Bronco:

Long-term liabilities

3/ Spartan Sportswear's current assets consist of cash, marketable securities, accounts receivable, and inventories. The following data were abstracted from a recent financial statement:

Inventories	$	170,000
Total assets	$	845,000
Current ratio		3.40
Acid-test ratio		1.70
Debt to equity ratio		1.60

Required:
Compute the long-term liabilities for Spartan:

Long-term liabilities

Answer 1

Answer
1	Long term assets for Bronco			965000
2	Long term liabilities for Bronco			776000
3	Long term liabilities for Spartan			350000
1	long term assets = Total assets - Current assets
	computation of current asset
	current ratio is 3.3 (given)
	current assets/current liabilities = 3.3
	therefore, current assets = 3.3 current liabilities
	acid test ratio is 2.3 (given)
	quick assets/current liabilties = 2.3
	therefore, quick assets = 2.3 current liabilities
	quick assets = current assets - inventory
	2.3 current liabilities= 3.3 current liabilities - 155000
	(3.3 - 2.3) current liabilities = 155000
	current liabilities = 155000
	therefore current asset = 3.3 current liabilities
	that is, 3.3 * 155000 = 465000
	therefore long term asset = 1430000-465000 =				965000
2	long term liabilities = Total debt - Current liability
a)	computation of total debt
	total debt + total equity = total assets = 152000(given)
	debt equity ratio is 1.5 (given)
	debt/equity = 1.5
	therefore, total debt = 1.5 equity
	1.5 equity + 1 equity = 1520000
	2.5 equity = 1520000
	equity = 1520000/2.5 = 608000
	therefore, total debt = 1.5 equity
	that is 1.5 * 608000 = 912000
b)	computation of current liability
	current ratio is 3.7 (given)
	current assets/current liabilities = 3.7
	therefore, current assets = 3.7 current liabilities
	acid test ratio is 2.45 (given)
	quick assets/current liabilties = 2.45
	therefore, quick assets = 2.45 current liabilities
	quick assets = current assets - inventory
	2.45 current liabilities= 3.7 current liabilities - 170000
	(3.7 - 2.45) current liabilities = 170000
	1.25 current liabilities = 170000
	therefore, current liabilities = 170000/1.25 = 136000
	therefore long term liabilties = 912000-136000 =				776000
3	long term liabilities = Total debt - Current liability
a)	computation of total debt
	total debt + total equity = total assets = 845000(given)
	debt equity ratio is 1.6 (given)
	debt/equity = 1.6
	therefore, total debt = 1.6 equity
	1.6 equity + 1 equity = 1520000		845000
	2.6 equity = 845000
	equity = 845000/2.6 = 325000
	therefore, total debt = 1.6 equity
	that is 1.6 * 325000 = 520000
b)	computation of current liability
	current ratio is 3.4 (given)
	current assets/current liabilities = 3.4
	therefore, current assets = 3.4 current liabilities
	acid test ratio is 1.7 (given)
	quick assets/current liabilties = 1.7
	therefore, quick assets = 1.7 current liabilities
	quick assets = current assets - inventory
	1.7 current liabilities= 3.4 current liabilities - 170000
	(3.4 - 1.7) current liabilities = 170000
	1.7 current liabilities = 170000
	therefore, current liabilities = 170000/1.7 = 100000
	therefore long term liabilties = 520000-170000 =				350000