Balance Sheet Harvey's Hamburger Stand has total assets of $3 million of which $1 million are current assets.Cash makes up 20 percent of the current assets and accounts receivable makes up another 5 percent of current assets.Harvey's gross plant and equipment has a book value of $1.5 million and other long-term assets have a book value of $1 million.Using this information,what is the balance of inventory and the balance of depreciation on Harvey's Hamburger Stand's balance sheet?
A)$250,000, $500,000
B)$250,000, $1 million
C)$750,000, $500,000
D)$750,000, $1 million

Question

Quizplus · Accepted Answer

The current assets are $1 million, with cash at 20% ($200,000) and accounts receivable at 5% ($50,000). Therefore, inventory is $1,000,000 - $200,000 - $50,000 = $750,000. Gross plant and equipment is $1.5 million, and total assets are $3 million. Subtracting current assets ($1 million) and other long-term assets ($1 million) leaves $1 million for net plant and equipment, indicating $500,000 in depreciation ($1.5 million - $1 million).

Balance Sheet Harvey's Hamburger Stand Has Total Assets of $3