33BP The Griggs Corporation has credi... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 33BP (page 86)

The Griggs Corporation has credit sales of $1,200,000. Given these ratios, fill in the following balance sheet.
Total assets turnover
2.4 times
Cash to total assets
2.0%
Accounts receivable turnover
8.0 times
Inventory turnover
10.0 times
Current ratio
2.0 times
Debt to total assets
61.0%
GRIGGS CORPORATION
Balance sheet
Assets
Liabilities and stockholder鈥檚 equity
Cash
Current debts
Account receivable
Long term debts
Inventory
Total debts
Total current assets
Equity
Fixed assets
Total assets
Total debts and stockholder鈥檚 equity

Short Answer

Expert verified

GRIGGS CORPORATION
Balance sheet
Assets	Amount ($)	Liabilities and stockholder鈥檚 equity	Amount ($)
Cash	10,000	Current debts	140,000
Account receivable	150,000	Long term debts	165,000
Inventory	120,000	Total debts	305,000
Total current assets	280,000	Equity	195,000
Fixed assets	220,000
Total assets	500,000	Total debts and stockholder鈥檚 equity	500,000

Step by step solution

Account receivable

$\begin{array}{rcl} Accounts receivable & = & \frac{Net credit sales}{Accounts receivable turnover ratio} \\ = & \frac{$ 1, 200, 000}{8} \\ = & $ 150, 000 \end{array}$

Total assets

$\begin{array}{rcl} Total assets & = & \frac{Sales}{Total asset turnover ratio} \\ = & \frac{$ 1, 200, 000}{2.4} \\ = & $ 500, 000 \end{array}$

Cash

$\begin{array}{rcl} Cash & = & Total assets 脳 Cash to total asset ratio \\ = & $ 500, 000 脳 2 % \\ = & $ 10, 000 \end{array}$

Inventory

$\begin{array}{rcl} Inventory & = & \frac{Sales}{Inventory turnover ratio} \\ = & \frac{$ 1, 200, 000}{10} \\ = & $ 120, 000 \end{array}$

Total current assets

$\begin{array}{rcl} Current assets & = & Cash + Accounts receivable + Inventory \\ = & $ 10, 000 + $ 150, 000 + $ 120, 000 \\ = & $ 280, 000 \end{array}$

Fixed assets

$\begin{array}{rcl} Fixed assets & = & Total assets - Current assets \\ = & $ 500, 000 - $ 280, 000 \\ = & $ 220, 000 \end{array}$

Current liabilities

$\begin{array}{rcl} Current liabilities & = & \frac{Current assets}{Current ratio} \\ = & \frac{$ 280, 000}{2} \\ = & $ 140, 000 \end{array}$

Total debts

$\begin{array}{rcl} Total debts & = & Total assets 脳 Debt to total assets \\ = & $ 500, 000 脳 61 % \\ = & $ 305, 000 \end{array}$

Long term debts

$\begin{array}{rcl} Long term debts & = & Total debts - Current debts \\ = & $305,000-$140,000 \\ = & $165,000 \end{array}$

Equity

$\begin{array}{rcl} Equity & = & Total debts and stockholder' s equity - Total debts \\ = & $ 500, 000 - $ 305, 000 \\ = & $ 195, 000 \end{array}$

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Times mirror and glass company
Sales	\(126,000
Less: Cost of goods sold	93,000
Gross profit	\)33,000
Less: selling and administrative expenses	11,000
Lease Expenses	4,000
Operating profit*	\(18,000
Less: Interest expenses	3,000
Earning before taxes	\)15,000
Less: Taxes (30%)	4,500
Earning after taxes	$10,500

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Short Answer

Step by step solution

Account receivable

Total assets

Cash

Inventory

Total current assets

Fixed assets

Current liabilities

Total debts

Long term debts

Equity

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Total assets turnover	2.4 times
Cash to total assets	2.0%
Accounts receivable turnover	8.0 times
Inventory turnover	10.0 times
Current ratio	2.0 times
Debt to total assets	61.0%