Question

Traditional Mills’s balance sheet appears as follows (amounts in thousands):

Use the following ratio data to complete Traditional Mills’s balance sheet.

1. Current ratio is 0.72.

2. Acid-test ratio is 0.36.

Short answer

Answer

Accounts Receivables = $855, Prepaid Expense= $100, Total Current Assets= $1800, Plant Assets, Net= $2710, Long-term Note Payable =$1290, Total Liabilities=$4550, Total Liabilities and Stockholders=$7000

Step-by-step solution

Preparation of Balance Sheet

TRADITIONAL MILLS
Balance Sheet December 31, 2018
Assets	$	Liabilities	$
Cash	45	Total Current Liabilities	2,500
Accounts Receivables	855	Long-term Note Payable	1,290
Merchandise Inventory	800	Other Long-term Liabilities	760
Prepaid Expenses	100	Total Liabilities	4,550
Total Current Assets	1,800
Plant Assets, Net	2,710	Stockholders’ Equity
Other Assets	2,490	Stockholders’ Equity	2,450
Total Assets	7,000	Total Liabilities and Stockholders’ Equity	7,000

Step 2:Calculations

Total asset = Total liabilities and stockholder’s equity

Therefore, total liabilities and stockholder’s equity = $7,000

Total liabilities and stockholder’s equity = Total liabilities + Stockholder's equity

Total liabilities = $7,000 - $2450

= $4,550

Total liabilities = Total current liability + Long term note payable + Other long term liabilities

Long term notes payable =$4,550 - $2,500 - $760

= $1290

Current ratio = Current asset/ Current liabilities

Current assets = 0.72x2500

= $1,800

Total asset = Plant asset + Other asset + Total current asset

Plant asset = $7,000 - $1,800 - $2,490

=$2,710

Acid ratio = (Cash + Investment + Account receivable)/ Current liabilities

Account receivable = $2,500x0.36 - $45

Account receivable = $855

Prepaid expense = Total Current Assets – Inventory – Account Receivable - Cash

= $1800 - $800 - $855 - $45

= $100