Question

The following information is from Harrelson Inc.’s financial statements. Sales (all credit) were $28.50 million for last year.

Sales to total assets	1.90 times
Total debts to total assets	35%
Current ratio	2.50 times
Inventory turnover	10.00 times
Average collection period	20 days
Fixed assets turnover	5.00 times

Fill in the balance sheet:

Cash		Current debts
Account receivable		Long term debts
Inventory		Total debts
Total current assets		Equity
Fixed assets
Total assets		Total debts and equity

Short answer

Cash	$4,888,356	Current debts	$3,720,000
Account receivable	$1,561,644	Long term debts	$1,530,000
Inventory	$2,850,000	Total debts	$5,250,000
Total current assets	$9,300,000	Equity	$9,750,000
Fixed assets	$5,700,000
Total assets	$15,000,000	Total debts and equity	$15,000,000

Step-by-step solution

Total asset

$\begin{array}{rcl}\mathrm{Total}\mathrm{assets}& =& \frac{\mathrm{Sales}}{\mathrm{Sales}\mathrm{to}\mathrm{total}\mathrm{assets}}\\ & =& \frac{\$28,500,000}{1.90}\\ & =& \$15,000,000\end{array}$

Total debts

$\begin{array}{rcl}\mathrm{Total}\mathrm{debts}& =& \mathrm{Total}\mathrm{assets}\times \mathrm{Total}\mathrm{debts}\mathrm{to}\mathrm{assets}\\ & =& \$15,000,000\times 35\%\\ & =& \$5,250,000\end{array}$

Fixed assets

$\begin{array}{rcl}\mathrm{Fixed}\mathrm{assets}& =& \frac{\mathrm{Sales}}{\mathrm{Fixed}\mathrm{asset}\mathrm{turnover}}\\ & =& \frac{\$28,500,000}{5}\\ & =& \$5,700,000\end{array}$

Current assets

$\begin{array}{rcl}\mathrm{Current}\mathrm{assets}& =& \mathrm{Total}\mathrm{assets}-\mathrm{Fixed}\mathrm{assets}\\ & =& \$15,000,000-\$5,700,000\\ & =& \$9,300,000\end{array}$

Current debts

$\begin{array}{rcl}\mathrm{Current}\mathrm{debts}& =& \frac{\mathrm{Current}\mathrm{assets}}{\mathrm{Current}\mathrm{ratio}}\\ & =& \frac{\$9,300,000}{2.50}\\ & =& \$3,720,000\end{array}$

Long term debts

$\begin{array}{rcl}\mathrm{Long}\mathrm{term}\mathrm{debts}& =& \mathrm{Total}\mathrm{debts}-\mathrm{Current}\mathrm{debts}\\ & =& \$5,250,000-\$3,720,000\\ & =& \$1,530,000\end{array}$

Equity

$\begin{array}{rcl}\mathrm{Equity}& =& \mathrm{Total}\mathrm{debts}\mathrm{and}\mathrm{equity}-\mathrm{Total}\mathrm{debts}\\ & =& \$15,000,000-\$5,250,000\\ & =& \$9,750,000\end{array}$

Inventory

$\begin{array}{rcl}\mathrm{Inventory}& =& \frac{\mathrm{Sales}}{\mathrm{Inventory}\mathrm{turnover}}\\ & =& \frac{\$28,500,000}{10}\\ & =& \$2,850,000\end{array}$

Account receivables turnover ratio

$\begin{array}{rcl}\mathrm{Average}\mathrm{receivable}\mathrm{turnover}\mathrm{ratio}& =& \frac{365}{\mathrm{Average}\mathrm{collection}\mathrm{period}}\\ & =& \frac{365}{20}\\ & =& 18.25\end{array}$

Account receivable

$\begin{array}{rcl}\mathrm{Accounts}\mathrm{receivable}& =& \frac{\mathrm{Net}\mathrm{credit}\mathrm{sales}}{\mathrm{Accounts}\mathrm{receivable}\mathrm{turnover}\mathrm{ratio}}\\ & =& \frac{\$28,500,000}{18.25}\\ & =& \$1,561,644\end{array}$

Cash

$\begin{array}{rcl}\mathrm{Cash}& =& \mathrm{Current}\mathrm{assets}-\mathrm{Inventory}-\mathrm{Accounts}\mathrm{receivable}\\ & =& \$9,300,000-\$2,850,000-\$1,561,644\\ & =& \$4,888,356\end{array}$