the assets of oasis & associates consist entirely of current assets and net plant and equipment, and the…

the assets of oasis & associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. the firm has total assets of $2.6 million and net plant and equipment equals $2.2 million. it has notes payable of $145,000, long - term debt of $746,000, and total common equity of $1.45 million. the firm does have accounts payable and accruals on its balance sheet. the firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.\nwrite out your answers completely. for example, 25 million should be entered as 25,000,000. negative values, if any, should be indicated by a minus sign. round your answers to the nearest dollar, if necessary.\n\na. what is the companys total debt?\n\nb. what is the amount of total liabilities and equity that appears on the firms balance sheet?\n\nc. what is the balance of current assets on the firms balance sheet?\n\nd. what is the balance of current liabilities on the firms balance sheet?\n\ne. what is the amount of accounts payable and accruals on its balance sheet? (hint: consider this as a single line item on the firms balance sheet.)\n\nf. what is the firms net working capital? if your answer is zero, enter \0\.\n\ng. what is the firms net operating working capital?\n\nh. what is the monetary difference between your answers to part f and g?\n\nwhat does the difference indicate?

the assets of oasis & associates consist entirely of current assets and net plant and equipment, and the firm has no excess cash. the firm has total assets of $2.6 million and net plant and equipment equals $2.2 million. it has notes payable of $145,000, long - term debt of $746,000, and total common equity of $1.45 million. the firm does have accounts payable and accruals on its balance sheet. the firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.\nwrite out your answers completely. for example, 25 million should be entered as 25,000,000. negative values, if any, should be indicated by a minus sign. round your answers to the nearest dollar, if necessary.\n\na. what is the companys total debt?\n\nb. what is the amount of total liabilities and equity that appears on the firms balance sheet?\n\nc. what is the balance of current assets on the firms balance sheet?\n\nd. what is the balance of current liabilities on the firms balance sheet?\n\ne. what is the amount of accounts payable and accruals on its balance sheet? (hint: consider this as a single line item on the firms balance sheet.)\n\nf. what is the firms net working capital? if your answer is zero, enter \0\.\n\ng. what is the firms net operating working capital?\n\nh. what is the monetary difference between your answers to part f and g?\n\nwhat does the difference indicate?

Answer

Explanation:

Step1: Recall accounting equation

Total assets = Total liabilities + Total equity. Since the firm finances with debt and common - equity only, Total debt = Total assets - Total common equity. Given Total assets = $2,600,000 and Total common equity = $1,450,000. Total debt=$2600000 - 1450000$

Step2: Calculate total debt

Total debt = $1,150,000

Step3: Total liabilities and equity on balance sheet

By the accounting equation, Total liabilities and equity = Total assets. So Total liabilities and equity = $2,600,000

Step4: Calculate current assets

Current assets=Total assets - Net plant and equipment. Given Net plant and equipment = $2,200,000 and Total assets = $2,600,000. Current assets=$2600000 - 2200000$ Current assets = $400,000

Step5: Calculate current liabilities

Total debt = Long - term debt+Current liabilities. Given Long - term debt = $746,000 and Total debt = $1,150,000. Current liabilities=Total debt - Long - term debt Current liabilities=$1150000 - 746000$ Current liabilities = $404,000

Step6: Calculate accounts payable and accruals

We are not given enough information to separately calculate accounts payable and accruals. But we know Current liabilities = Accounts payable and accruals+Notes payable. Given Notes payable = $145,000 and Current liabilities = $404,000. Accounts payable and accruals=Current liabilities - Notes payable Accounts payable and accruals=$404000 - 145000$ Accounts payable and accruals = $259,000

Step7: Calculate net working capital

Net working capital=Current assets - Current liabilities Net working capital=$400000 - 404000$ Net working capital=-$4,000

Step8: Assume no non - operating current assets or liabilities for simplicity (not given otherwise)

Net operating working capital = Net working capital=-$4,000

Step9: Calculate the difference between f and g

Difference = Net working capital - Net operating working capital Difference=- 4000-(-4000) Difference = $0

Answer:

a. $1,150,000 b. $2,600,000 c. $400,000 d. $404,000 e. $259,000 f. -$4,000 g. -$4,000 h. $0