Brenda's Bar and Grill has total assets of $17 million of which $5 million are current assets. Cash makes up 12 percent of the current assets and accounts receivable makes up another 40 percent of current assets. Brenda's gross plant and equipment has a cost value of $12 million and other long-term assets have a cost value of $1,000,000. Using this information, what are the balance of inventory and the balance of depreciation on Brenda's Bar and Grill's balance sheet?
A) $2.4 million; $1 million
B) $3.4 million; $2 million
C) $1.4 million; $1 million
D) $0.4 million; $3 million

Question

Quizplus · Accepted Answer

The balance of inventory is calculated as: Current assets ($5 million) - Cash (12% of $5 million = $0.6 million) - Accounts receivable (40% of $5 million = $2 million) = $2.4 million. The balance of depreciation is calculated as: Gross plant and equipment ($12 million) + Other long-term assets ($1 million) - Total assets ($17 million) = $1 million.

Brenda's Bar and Grill Has Total Assets of $17 Million