Orem Corporation's current liabilities are $254,840, its long-term liabilities are $1,327,560, and its working capital is $356,800. If the corporation's debt-to-equity ratio is 0.46, total long-term assets must equal:
A) $3,440,000
B) $4,665,600
C) $4,410,760
D) $3,856,760

Question

Quizplus · Accepted Answer

We can use the formula for debt-to-equity ratio to find the total equity of the corporation:

Debt-to-equity ratio = Total liabilities / Total equity
0.46 = (254,840 + 1,327,560) / Total equity
Total equity = 2,175,400

We can then use the formula for total assets to find the total long-term assets:

Total assets = Total liabilities + Total equity
Total assets = 254,840 + 1,327,560 + 2,175,400
Total assets = 3,757,800

Finally, we can use the formula for working capital to find the current assets:

Working capital = Current assets - Current liabilities
356,800 = Current assets - 254,840
Current assets = 611,640

We can now use the formula for total assets again to find the current assets:

Total assets = Current assets + Total long-term assets
3,757,800 = 611,640 + Total long-term assets
Total long-term assets = 4,146,160

Therefore, the correct answer is C: $4,410,760.

Orem Corporation's Current Liabilities Are $254,840, Its Long-Term Liabilities Are