• IBM Inc . Given: cash=$100k, marketable securities =$150k, accounts receivable
ID: 2808867 • Letter: #
Question
•IBM Inc. Given: cash=$100k, marketable securities =$150k, accounts receivables =$350k, inventories =$250k, building and equipment =$450k, other investments =$250k; prepaid expenses =$60k; accounts payable=$225k, short term notes payable=$145k, accrued expenses= $50k; bonds payable in 2028 =$120k, pref. stock outstanding =$145k, common stock shares outstanding =20,000 shares.
•Calculate: 1) current assets; 2) long term assets; 3) total assets; 4) current liabilities; 5) total liabilities; 6) stockholders equity, 7) net worth or book value; 8) book value per share, 9) interest bearing short term liabilities, 10) total interest bearing liabilities, 11) net working capital.
Explanation / Answer
1.Current Assets
Current Assets are short-term assets that can be converted to cash within one year or less.
Current assets=Cash+Marketable securities+ Accounts receivable+Inventories
=$100,000+$150,000+350,000+$250,000= $850,000.
2.Long-term assets
Long-term assets are assets that will not be converted to cash within one year.
Long term assets=Building and equipment+ Other investments+ Prepaid expense
=$450,000+ $250,000+ $60,000=$760,000.
3.Total Assets
Total assets are anything the business owns which have a monetary value.
Total assets= Long term assets+ Current assets
=$760,000+$850,000=$1,610,000.
4.Current Liabilities
Current Liabilities are short-term financial obligation which are payable in 1 year or less than 1 year.
Current Liabilities=Accounts payable+ Short term payable+ Accrued expenses
=$225,000+$145,000+ $50,000= $420,000.
5.Total liabilities
Total liabilities includes all the money which a business owes.
Total Liabilities= Bonds payable+ Preferred stock outstanding
=$120,000+ $145,000= $265,000.
6.Stockholder’s equity
Stockholder’s equity is the amount of capital given to a business by its shareholders.
Stockholder’s equity= Total assets-Total liabilities
=$1,610,000-$265,000=$1,345,000.
7.Net worth or book value
Net worth is the ownership interest of the shareholders in the assets of a company.
Net worth=Total assets-total liabilities
=$1,610,000-$265,000= $1,345,000.
8.Book value per share
Book value per share shows the book value for every share of stock.
Book value per share= Shareholder’s equity- Preferred stock holding/Number of common shares
=$1,345,000-$145,000/20,000= $60 per share.
9.Interest bearing short-term liabilities
Interest bearing short-term liabilities refers to debts that are due in one year.
Short-term payable of $145,000 is the only interest bearing liability in the company’s balance sheet.
10.Total interest bearing liabilities
Interest bearing liabilities are liabilities of a business that require interest payment.
Interest bearing liabilities= Short term payable+ Bonds payable
=$145,000+ $120,000= $265,000.
11.Net working capital
Net working capital measures the business ‘ability to pay off its current liabilities using current assets. It shows a firm’s short-term liquidity and is useful to vendors and creditors.
Net working capital=Current assets- Current liabilities
=$850,000-$420,000= $430,000.
I hope that was helpful :)
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