The accountant of Villa Company projected the following condensed Balance Sheet for 200C:a. 9,000b. 25,000c. 27,000d. 30,000 ASSETSEQUITIESP 500,000 Current liabilitiesP 200,000Current assetsFixed assets1,500,000 Long-term liabilities P 800,000Owners' Equity1,000,000 1,800,000P 2,000,000P 2,000,000The return on current assets and fixed assets are approximately 7% and 16%,respectively. The current liabilities cost 2% annually while the long-term funds on theaverage cost 8%. To improve the earnings, management plans to shift P 200,000 of itscurrent assets to fixed assets and P 150,000 of long-term funds to current liabilities.What would be the increase in the earnings as a result of the change in asset mixand financing mix?

Return on Current Assets = 7% Return on Fixed Assets = 16% Cost of Current liabilities = 2% Cost of…

Answered: ASSETS EQUITIES P 500,000 1,500,000…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The accountant of Villa Company projected the following condensed Balance Sheet for 200C:

a. 9,000
b. 25,000
c. 27,000
d. 30,000

ASSETS
EQUITIES
P 500,000 Current liabilities
P 200,000
Current assets
Fixed assets
1,500,000 Long-term liabilities P 800,000
Owners' Equity
1,000,000 1,800,000
P 2,000,000
P 2,000,000
The return on current assets and fixed assets are approximately 7% and 16%,
respectively. The current liabilities cost 2% annually while the long-term funds on the
average cost 8%. To improve the earnings, management plans to shift P 200,000 of its
current assets to fixed assets and P 150,000 of long-term funds to current liabilities.
What would be the increase in the earnings as a result of the change in asset mix
and financing mix?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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