Answer :
To complete the FAA Industry balance sheet for December 31, 2006, let's analyze and calculate the missing values step-by-step using the provided information.
1. Sales and gross profit margin:
- Sales totaled Br. 1,800,000.
- Gross profit margin was 25%.
From this, we can calculate:
- Gross profit = [tex]\( 0.25 \times 1,800,000 = 450,000 \)[/tex]
- Cost of goods sold (COGS) = Sales - Gross profit = [tex]\( 1,800,000 - 450,000 = 1,350,000 \)[/tex]
2. Inventory Turnover:
- Inventory Turnover = 6 times.
Inventory turnover formula is:
- Inventory Turnover = [tex]\(\frac{\text{COGS}}{\text{Inventories}}\)[/tex]
Rearranging the formula to find Inventories:
- Inventories = [tex]\(\frac{\text{COGS}}{\text{Inventory Turnover}} = \frac{1,350,000}{6} = 225,000\)[/tex]
So, [tex]\( \text{Inventories} = Br. 225,000\)[/tex]
3. Average Collection Period:
- Average Collection Period was 40 days.
We can calculate Accounts Receivable using:
- Average Collection Period = [tex]\(\frac{\text{Accounts Receivable}}{\text{Sales / Days in Year}}\)[/tex]
Rearranging to solve for Accounts Receivable:
- Accounts Receivable = [tex]\(\text{Average Collection Period} \times \frac{\text{Sales}}{\text{Days in Year}}\)[/tex]
- [tex]\( = 40 \times \frac{1,800,000}{360} = 200,000\)[/tex]
4. Current Ratio:
- Current Ratio was 1.60 times.
- Current Ratio = [tex]\(\frac{\text{Total Current Assets}}{\text{Total Current Liabilities}}\)[/tex]
Let's first aggregate the components of Total Current Assets:
- Cash = Br. 30,000
- Marketable Securities = Br. 25,000
- Accounts Receivable = Br. 200,000
- Inventories = Br. 225,000
So, Total Current Assets = [tex]\( 30,000 + 25,000 + 200,000 + 225,000 = 480,000\)[/tex]
Rearrange current ratio formula to find Total Current Liabilities:
- Total Current Liabilities = [tex]\(\frac{\text{Total Current Assets}}{\text{Current Ratio}} = \frac{480,000}{1.60} = 300,000\)[/tex]
5. Accruals:
- Given [tex]\( C = 25\% \)[/tex] of Accounts Payable.
- Accounts Payable = Br. 120,000.
Therefore, [tex]\( \text{Accruals} = 0.25 \times 120,000 = 30,000\)[/tex].
6. Total Assets:
- Total Asset Turnover ratio was [tex]\( 1.20 \)[/tex].
- Total Asset Turnover = [tex]\(\frac{\text{Sales}}{\text{Total Assets}}\)[/tex]
Rearranging to find Total Assets:
- Total Assets = [tex]\(\frac{\text{Sales}}{\text{Total Asset Turnover}} = \frac{1,800,000}{1.20} = 1,500,000\)[/tex]
7. Total Liabilities and Stockholders' Equity:
- Stockholders’ equity = Br. 600,000
Given Debt Ratio which is 60%,
- Debt Ratio = [tex]\(\frac{\text{Total Liabilities}}{\text{Total Assets}}\)[/tex]
From this, we can find Total Liabilities:
- Total Liabilities = Debt Ratio × Total Assets = [tex]\( 0.60 \times 1,500,000 = 900,000\)[/tex]
So Total Liabilities and Stockholders' Equity = [tex]\(\text{Total Liabilities} + \text{Stockholders' Equity}\)[/tex]
- [tex]\( 900,000 + 600,000 = 1,500,000\)[/tex]
8. Net Fixed Assets:
- Net Fixed Assets = Total Assets - Total Current Assets
- [tex]\(1,500,000 - 480,000 = 1,020,000\)[/tex]
9. Notes Payable:
- Given [tex]\( C = 25% \)[/tex] of Accounts Payable
- Notes Payable = [tex]\(0.25 \times 120,000 = 30,000\)[/tex]
10. Long-term Debt:
- Total Liabilities = Current Liabilities + Long-term Debt.
- Rearrange to solve for Long-term Debt:
- Long-term Debt = Total Liabilities - Total Current Liabilities.
- [tex]\( 900,000 - 300,000 = 600,000\)[/tex]
Now with all these computed values, the balance sheet can be completed as:
FAA Industry Balance sheet
December 31, 2006:
1. Cash Br. 30,000
2. Marketable Securities Br. 25,000
3. Accounts Receivable Br. 200,000
4. Inventories [tex]\( b \)[/tex] = Br. 225,000
5. Total Current Assets [tex]\( d \)[/tex] = Br. 480,000
6. Net Fixed Assets [tex]\( f \)[/tex] and [tex]\( h \)[/tex] = Br. 1,020,000
7. Total Assets [tex]\( i \)[/tex] = Br. 1,500,000
8. Notes Payable [tex]\( a \)[/tex] = Br. 30,000
9. Accruals [tex]\( c \)[/tex] = Br. 30,000
10. Total Current Liabilities = Br. 300,000
11. Long-term Debt [tex]\( g \)[/tex] = Br. 600,000
12. Stockholders' Equity Br. 600,000
13. Total Liabilities and Stockholders' Equity = Br. 1,500,000
1. Sales and gross profit margin:
- Sales totaled Br. 1,800,000.
- Gross profit margin was 25%.
From this, we can calculate:
- Gross profit = [tex]\( 0.25 \times 1,800,000 = 450,000 \)[/tex]
- Cost of goods sold (COGS) = Sales - Gross profit = [tex]\( 1,800,000 - 450,000 = 1,350,000 \)[/tex]
2. Inventory Turnover:
- Inventory Turnover = 6 times.
Inventory turnover formula is:
- Inventory Turnover = [tex]\(\frac{\text{COGS}}{\text{Inventories}}\)[/tex]
Rearranging the formula to find Inventories:
- Inventories = [tex]\(\frac{\text{COGS}}{\text{Inventory Turnover}} = \frac{1,350,000}{6} = 225,000\)[/tex]
So, [tex]\( \text{Inventories} = Br. 225,000\)[/tex]
3. Average Collection Period:
- Average Collection Period was 40 days.
We can calculate Accounts Receivable using:
- Average Collection Period = [tex]\(\frac{\text{Accounts Receivable}}{\text{Sales / Days in Year}}\)[/tex]
Rearranging to solve for Accounts Receivable:
- Accounts Receivable = [tex]\(\text{Average Collection Period} \times \frac{\text{Sales}}{\text{Days in Year}}\)[/tex]
- [tex]\( = 40 \times \frac{1,800,000}{360} = 200,000\)[/tex]
4. Current Ratio:
- Current Ratio was 1.60 times.
- Current Ratio = [tex]\(\frac{\text{Total Current Assets}}{\text{Total Current Liabilities}}\)[/tex]
Let's first aggregate the components of Total Current Assets:
- Cash = Br. 30,000
- Marketable Securities = Br. 25,000
- Accounts Receivable = Br. 200,000
- Inventories = Br. 225,000
So, Total Current Assets = [tex]\( 30,000 + 25,000 + 200,000 + 225,000 = 480,000\)[/tex]
Rearrange current ratio formula to find Total Current Liabilities:
- Total Current Liabilities = [tex]\(\frac{\text{Total Current Assets}}{\text{Current Ratio}} = \frac{480,000}{1.60} = 300,000\)[/tex]
5. Accruals:
- Given [tex]\( C = 25\% \)[/tex] of Accounts Payable.
- Accounts Payable = Br. 120,000.
Therefore, [tex]\( \text{Accruals} = 0.25 \times 120,000 = 30,000\)[/tex].
6. Total Assets:
- Total Asset Turnover ratio was [tex]\( 1.20 \)[/tex].
- Total Asset Turnover = [tex]\(\frac{\text{Sales}}{\text{Total Assets}}\)[/tex]
Rearranging to find Total Assets:
- Total Assets = [tex]\(\frac{\text{Sales}}{\text{Total Asset Turnover}} = \frac{1,800,000}{1.20} = 1,500,000\)[/tex]
7. Total Liabilities and Stockholders' Equity:
- Stockholders’ equity = Br. 600,000
Given Debt Ratio which is 60%,
- Debt Ratio = [tex]\(\frac{\text{Total Liabilities}}{\text{Total Assets}}\)[/tex]
From this, we can find Total Liabilities:
- Total Liabilities = Debt Ratio × Total Assets = [tex]\( 0.60 \times 1,500,000 = 900,000\)[/tex]
So Total Liabilities and Stockholders' Equity = [tex]\(\text{Total Liabilities} + \text{Stockholders' Equity}\)[/tex]
- [tex]\( 900,000 + 600,000 = 1,500,000\)[/tex]
8. Net Fixed Assets:
- Net Fixed Assets = Total Assets - Total Current Assets
- [tex]\(1,500,000 - 480,000 = 1,020,000\)[/tex]
9. Notes Payable:
- Given [tex]\( C = 25% \)[/tex] of Accounts Payable
- Notes Payable = [tex]\(0.25 \times 120,000 = 30,000\)[/tex]
10. Long-term Debt:
- Total Liabilities = Current Liabilities + Long-term Debt.
- Rearrange to solve for Long-term Debt:
- Long-term Debt = Total Liabilities - Total Current Liabilities.
- [tex]\( 900,000 - 300,000 = 600,000\)[/tex]
Now with all these computed values, the balance sheet can be completed as:
FAA Industry Balance sheet
December 31, 2006:
1. Cash Br. 30,000
2. Marketable Securities Br. 25,000
3. Accounts Receivable Br. 200,000
4. Inventories [tex]\( b \)[/tex] = Br. 225,000
5. Total Current Assets [tex]\( d \)[/tex] = Br. 480,000
6. Net Fixed Assets [tex]\( f \)[/tex] and [tex]\( h \)[/tex] = Br. 1,020,000
7. Total Assets [tex]\( i \)[/tex] = Br. 1,500,000
8. Notes Payable [tex]\( a \)[/tex] = Br. 30,000
9. Accruals [tex]\( c \)[/tex] = Br. 30,000
10. Total Current Liabilities = Br. 300,000
11. Long-term Debt [tex]\( g \)[/tex] = Br. 600,000
12. Stockholders' Equity Br. 600,000
13. Total Liabilities and Stockholders' Equity = Br. 1,500,000
