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A firm has inventory of $46,500, accounts payable of $17,400, cash of $1,250, net fixed assets of $318,650, long-term debt of $109,500, and accounts receivable of $16,600. What is the common-size percentage of the equity?

a. 70.60 percent
b. 70.12 percent
c. 66.87 percent
d. 42.08 percent
e. 68.75 percent

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Answer:

The common-size percentage of the equity is c. 66.87 percent

Explanation:

Total asset of the firm = Inventory + Cash + Net fixed assets + Accounts receivable = $46,500 + $1,250 + $318,650 + $16,600 = $383,000

Liabilities = Accounts payable + Long-term debt = $17,400 + $109,500 = $126,900

Basing on Accounting Equation Formula :

Total Assets = Liabilities + Owner’s Equity

Owner’s Equity = Total Assets - Liabilities = $383,000 - $126,900 = $256,100

The common-size percentage of the equity = ($256,100/$383,000) x 100% = 66.87%

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