Rhonda Rancher has applied for a loan. Her banker, Larry Loanmaker, says the old
ID: 2560709 • Letter: R
Question
Rhonda Rancher has applied for a loan. Her banker, Larry Loanmaker, says the old balance sheet on file must be brought up to date before a loan will be considered. Rhonda spends the rest of the afternoon taking inventory and gathering other information. Complete the balance sheet on the attached pages using the information below compiled by Rhonda on February 15 4200 cwt. @ $4.40 per cwt Milo on hand Hay on hand Growing wheat Farm mortgage (due 4/01) 75 tons S50.00 per ton 280 acres S22.50 per acre $14,000 principal S20,000 accrued interest balance after 4/01 payment S208,000 Buildings & improvements Note payable on feeder cattle (all due 11/15) Calves (to be sold in May) Feeder cattle (to be sold in 60 day) Note payable at bank (all due 3/1) Vehicles Other machinery& equipment Loan on beef cows (due 10/01) S34,000 98 head @ S275 per head 138 head S575 per head S52,000 15,500 80,500 S9,000 principal, S3,900 accrued interest balance after 10/1 payment S38,000 1020 acres S560 per acre 106 head S650 per head 4 head @ S1,000 each S5,400 S4,200 S1,600 $2,000 200 shares S65 per share Land (present market value) Beef breeding cows Checking account balance Account payable at Joe's Feed & Seed Account receivabloe Shop Equip. (welder, lathe, drill press, etc.) Ford Motor Co. stockExplanation / Answer
Answer:
1. What is Rhonda's owner's equity as of February 15, 2007?
Answer___$560,630_______
Owner Equity:
Contributed capital
50,000
Retained earnings
305,000
Valuation adjustment*
205,630
Total equity
$560,630
Total liabilities and owner equity
$950,930
_______________________________________________________________________
2. How much working capital does Rhonda have?
Answer__$16,530________
Current Liabilities:
Account Payable
4,200
Notes payable within 1 year
86,000
Current portion of term debt
23,000
Accured Interest
23,900
Income taxes payable
7,200
Other accrued expenses
0
Total Current Liabilities
$144,300
Currrent Assets:
Cash/checking acct.
$5,400
Marketable securities
13,000
Inventories
Crops
22,230
Livestock
106,300
Accounts receivable
1,600
Prepaid expenses
6,000
Investment in growing crops
6,300
Other current assets
0
Total Current Assets
$160,830
working capital does Rhonda have
=160830-144300
=$16530
_______________________________________________________
3. What is her current ratio?
Answer__1.11________
=Currett assets / current liableity
=160830 /144300
=1.11
____________________________________________
4. What is her debt/asset ratio
Answer__.41_________
debt/asset ratio
= debt/asset
Assets
Liabilities
Currrent Assets:
Current Liabilities:
Cash/checking acct.
$5,400
Account Payable
4,200
Marketable securities
13,000
Notes payable within 1 year
86,000
Inventories
Current portion of term debt
23,000
Crops
22,230
Accured Interest
23,900
Livestock
106,300
Income taxes payable
7,200
Accounts receivable
1,600
Other accrued expenses
0
Prepaid expenses
6,000
Total Current Liabilities
$144,300
Investment in growing crops
6,300
Other current assets
0
Total Current Assets
$160,830
Noncurrent Liabiltiies:
Notes payable
Machinery
0
Noncurrent Assets:
Breeding Livestock
38,000
Real estate debt
208,000
Machines and equipment
98,000
Breeding livestock
72,900
Total Noncurrent Liabilities
$246,000
Buildings and improvments
48,000
Total Liabilities
$390,300
Land
571,200
Other noncurrent assets
0
Owner Equity:
Total Noncurrent Assets
$790,100
Total Assets
$950,930
Contributed capital
50,000
Retained earnings
305,000
Valuation adjustment*
205,630
Total equity
$560,630
Total liabilities and owner equity
$950,930
debt/asset
=390300/950930
=0.41
__________________________________________________________________
5. What is her debt/equity ratio?
Answer___0.70________
=debt/ equity
=390300 /560630
=0.70
__________________________________
6. What is her equity/asset ratio?
Answer____0.59______
equity/asset
=560630/950930
=0.59
______________________________________________________________
9
a)
What will Rhonda's owner's equity be immediately after the transactions are completed if there are no other changes on her balance sheet?
Answer:
=0.44
c)
What will be her debt/equity ratio be?
=0.79
Owner Equity:
Contributed capital
50,000
Retained earnings
305,000
Valuation adjustment*
205,630
Total equity
$560,630
Total liabilities and owner equity
$950,930
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