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28 December, 15:41

Problem 2-16 Balance Sheet (LG2-1) Glen's Tobacco Shop has total assets of $96.4 million. Fifty percent of these assets are financed with debt of which $30.0 million is current liabilities. The firm has no preferred stock but the balance in common stock and paid-in surplus is $20.4 million. What is the balance for long-term debt and retained earnings on Glen's Tobacco Shop's balance sheet? (Enter your answers in millions of dollars rounded to 1 decimal place.)

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  1. 28 December, 17:09
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    The balance for long-term debt and retained earnings on Glen's Tobacco Shop's balance sheet is $18.2 million and $27.8 million respectively

    Explanation:

    The computation is shown below:

    Given that

    Debt = 50% * Total Assets

    = 50% * $96.4 million

    = $48.20 million

    As we know that

    Total Debt = Current Liabilities + Long Term Debt

    $48.20 million = $ 30.0 million + Long Term Debt

    So, the long term debt is $18.2 million

    Now,

    Total Assets = Total Liabilities + Owner's Equity

    where,

    Total Assets = Long Term Debt + Current Liabilities + Common Stock and paid-in surplus + Retained Earnings

    $96.4 million = $18.2 million + $30.0 million + $20.4 million + retained earnings

    So, the retained earnings is $27.8 million
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