Chapter 2: 34BP_b (page 86)

We are given the following information for the Pettit Corporation.
Sales (credit)
$3,549,000
Cash
179,000
Inventory
911,000
Current liabilities
788,000
Assets turnover
1.40 times
Current ratio
2.95 times
Debt-to-assets ratio
40%
Receivables turnover
7 times
Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items.
b. Marketable securities.

Short Answer

Expert verified

The marketable securities of the company are $727,600.

Step by step solution

Current assets

$\begin{array}{rcl} Current asstes & = & Current liabilities \times Current ratio \\ = & $ 788, 000 \times 2.95 \\ = & $ 2, 324, 600 \end{array}$

Marketable securities

$\begin{array}{rcl} Marketable securities & = & Current assets - Cash - Accounts receivable - Inventory \\ = & $ 2, 324, 600 - $ 179, 000 - $ 507, 000 - $ 911, 000 \\ = & $ 727, 600 \end{array}$

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Indicate whether item is on Balance sheet (BS) or Income statement (IS)	If on Balance sheet, designate which category	Item
		Accounts receivable
		Retained earnings
		Income tax expense
		Accrued expense
		Cash
		Selling and administrative expenses
		Plant and equipment
		Operating expenses
		Marketable securities
		Interest expense
		Sales
		Notes payable (6 month)
		Bonds payable, maturity 2019
		Common stock
		Depreciation expense
		Inventories
		Capital in excess of par value
		Net income (earning after tax)
		Income tax payable

Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000

Short Answer

Step by step solution

Current assets

Marketable securities

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Sales (credit)	$3,549,000
Cash	179,000
Inventory	911,000
Current liabilities	788,000
Assets turnover	1.40 times
Current ratio	2.95 times
Debt-to-assets ratio	40%
Receivables turnover	7 times