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Let's go through the solution step-by-step to complete the FAA Industry Balance Sheet for December 31, 2006, using the given information.
### Given Information:
1. Sales: Br. 1,800,000
2. Gross Profit Margin: 25%
3. Inventory Turnover: 6 times
4. Days in the year: 360
5. Average Collection Period: 40 days
6. Current Ratio: 1.60 times
7. Total Asset Turnover Ratio: 1.20 times
8. Debt Ratio: 60%
9. C (Accounts Payable Percentage): 25%
### Step-by-Step Solution:
1. Calculate Gross Profit and Cost of Goods Sold (COGS):
- Gross Profit: Sales Gross Profit Margin = Br. 1,800,000 25% = Br. 450,000
- COGS: Sales - Gross Profit = Br. 1,800,000 - Br. 450,000 = Br. 1,350,000
2. Calculate Inventory:
- Inventory: COGS / Inventory Turnover = Br. 1,350,000 / 6 = Br. 225,000
3. Calculate Accounts Receivable:
- Accounts Receivable: (Sales / Days in Year) Average Collection Period = (Br. 1,800,000 / 360) 40 = Br. 200,000
4. Calculate Total Current Assets:
- Total Current Liabilities = Br. 120,000 (Accounts Payable given)
- Total Current Assets: Current Ratio Total Current Liabilities = 1.60 Br. 120,000 = Br. 192,000
5. Calculate Total Assets:
- Total Assets: Sales / Total Asset Turnover Ratio = Br. 1,800,000 / 1.20 = Br. 1,500,000
6. Calculate Accounts Payable Contribution and Accruals:
- Accounts Payable (already given): Br. 120,000
- Contribution of Accounts Payable = 25% Accounts Payable = 25% Br. 120,000 = Br. 30,000
- Accruals: Total Current Liabilities - Accounts Payable = Br. 120,000 - Br. 120,000 - Br. 30,000 = Br. -30,000 [This might signify a rounding issue or misinterpretation; normally, Accruals would mean other short-term liabilities]
7. Calculate Total Liabilities:
- Total Liabilities: Total Assets Debt Ratio = Br. 1,500,000 60% = Br. 900,000
8. Determine Notes Payable and Long Term Debt:
- Notes Payable: Total Liabilities - Total Current Liabilities = Br. 900,000 - Br. 120,000 = Br. 780,000
9. Verify Total Assets and Stockholders' Equity:
- Stockholders' Equity (given): Br. 600,000
- Total Liabilities and Stockholders’ Equity: Br. 1,500,000 (to be consistent with Total Assets)
### Completed Balance Sheet:
[tex]\[ \begin{array}{|c|c|c|} \hline & \text{FAA Industry} & \\ \hline \begin{array}{l} \text{Balance Sheet}\\ \text{December 31} \end{array} & & \\ \hline \multicolumn{2}{|c|}{\text{Cash........................................} \text{Br. 30,000}} & \text{Accounts Payable..................... Br. 120,000} \\ \hline \text{Marketable Securities} & \text{Br. 25,000} & \text{Notes Payable.............................(a) Br. 780,000} \\ \hline \text{Accounts Receivable} & \text{(b) Br. 200,000} & \text{Accruals........................................ (c) Br. -30,000} \\ \hline \text{Inventories} & \text{(d) Br. 225,000} & \text{Total Current Liabilities..........(e) Br. 120,000} \\ \hline \text{Total Current Assets} & \text{(f) Br. 192,000} & \\ \hline \text{Net Fixed Assets} & & \text{(g) Br. 780,000} \\ \hline \text{Total Assets} & \text{(h) Br. 1,500,000} & \text{Total Liab \& Stock. Equity....... (i) Br. 1,500,000} \\ \hline \end{array} \][/tex]
### Given Information:
1. Sales: Br. 1,800,000
2. Gross Profit Margin: 25%
3. Inventory Turnover: 6 times
4. Days in the year: 360
5. Average Collection Period: 40 days
6. Current Ratio: 1.60 times
7. Total Asset Turnover Ratio: 1.20 times
8. Debt Ratio: 60%
9. C (Accounts Payable Percentage): 25%
### Step-by-Step Solution:
1. Calculate Gross Profit and Cost of Goods Sold (COGS):
- Gross Profit: Sales Gross Profit Margin = Br. 1,800,000 25% = Br. 450,000
- COGS: Sales - Gross Profit = Br. 1,800,000 - Br. 450,000 = Br. 1,350,000
2. Calculate Inventory:
- Inventory: COGS / Inventory Turnover = Br. 1,350,000 / 6 = Br. 225,000
3. Calculate Accounts Receivable:
- Accounts Receivable: (Sales / Days in Year) Average Collection Period = (Br. 1,800,000 / 360) 40 = Br. 200,000
4. Calculate Total Current Assets:
- Total Current Liabilities = Br. 120,000 (Accounts Payable given)
- Total Current Assets: Current Ratio Total Current Liabilities = 1.60 Br. 120,000 = Br. 192,000
5. Calculate Total Assets:
- Total Assets: Sales / Total Asset Turnover Ratio = Br. 1,800,000 / 1.20 = Br. 1,500,000
6. Calculate Accounts Payable Contribution and Accruals:
- Accounts Payable (already given): Br. 120,000
- Contribution of Accounts Payable = 25% Accounts Payable = 25% Br. 120,000 = Br. 30,000
- Accruals: Total Current Liabilities - Accounts Payable = Br. 120,000 - Br. 120,000 - Br. 30,000 = Br. -30,000 [This might signify a rounding issue or misinterpretation; normally, Accruals would mean other short-term liabilities]
7. Calculate Total Liabilities:
- Total Liabilities: Total Assets Debt Ratio = Br. 1,500,000 60% = Br. 900,000
8. Determine Notes Payable and Long Term Debt:
- Notes Payable: Total Liabilities - Total Current Liabilities = Br. 900,000 - Br. 120,000 = Br. 780,000
9. Verify Total Assets and Stockholders' Equity:
- Stockholders' Equity (given): Br. 600,000
- Total Liabilities and Stockholders’ Equity: Br. 1,500,000 (to be consistent with Total Assets)
### Completed Balance Sheet:
[tex]\[ \begin{array}{|c|c|c|} \hline & \text{FAA Industry} & \\ \hline \begin{array}{l} \text{Balance Sheet}\\ \text{December 31} \end{array} & & \\ \hline \multicolumn{2}{|c|}{\text{Cash........................................} \text{Br. 30,000}} & \text{Accounts Payable..................... Br. 120,000} \\ \hline \text{Marketable Securities} & \text{Br. 25,000} & \text{Notes Payable.............................(a) Br. 780,000} \\ \hline \text{Accounts Receivable} & \text{(b) Br. 200,000} & \text{Accruals........................................ (c) Br. -30,000} \\ \hline \text{Inventories} & \text{(d) Br. 225,000} & \text{Total Current Liabilities..........(e) Br. 120,000} \\ \hline \text{Total Current Assets} & \text{(f) Br. 192,000} & \\ \hline \text{Net Fixed Assets} & & \text{(g) Br. 780,000} \\ \hline \text{Total Assets} & \text{(h) Br. 1,500,000} & \text{Total Liab \& Stock. Equity....... (i) Br. 1,500,000} \\ \hline \end{array} \][/tex]
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