“Walk me through the balance sheet.”
"Walk me through the balance sheet." This is the natural follow-up to the income statement — and the strongest answers don't just list the three sections, they show that Assets actually equal Liabilities plus Equity with real numbers. Use the figures below for Atlas Manufacturing Inc. — the same company from Case 1 — to build out its balance sheet as of the same fiscal year-end.
Task: explain how the balance sheet is structured across Assets, Liabilities, and Equity, then prove that it balances using the figures for Atlas Manufacturing Inc. below.
The following balance sheet line items are reported as of the same fiscal year-end as Case 1.
| Line Item | Amount |
|---|---|
| Cash | $80.0m |
| Accounts Receivable | $60.0m |
| Inventory | $40.0m |
| PP&E, net | $220.0m |
| Goodwill & Intangibles | $50.0m |
| Accounts Payable | $35.0m |
| Short-Term Debt | $15.0m |
| Long-Term Debt | $150.0m |
| Common Stock & APIC | $100.0m |
| Retained Earnings | $150.0m |
Total Current Assets = Cash + Accounts Receivable + Inventory
Using this formula, compute Total Current Assets.
Total Assets = Total Current Assets + PP&E, net + Goodwill & Intangibles
Using this formula, compute Total Assets.
Total Liabilities = Accounts Payable + Short-Term Debt + Long-Term Debt
Using this formula, compute Total Liabilities.
Total Equity = Common Stock & APIC + Retained Earnings
Assume:
Using this formula, compute Total Equity — and verify that Total Assets = Total Liabilities + Total Equity.
Try answering out loud first — then reveal the model answer and compare.
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