Sunset Roofing Inc. has total owners' equity of $37,948. The firm has current assets of $19,422,...

Question:

Sunset Roofing Inc. has total owners' equity of $37,948. The firm has current assets of $19,422, current liabilities of $13,021 and total assets of $86,428.

What is the value of the long-term debt?

Long-term Debt:

The long-term debt represents the amount that a company owes to its creditors and is required to repay the same after a period of one year which may extend to many years as agreed upon. The long-term debt comprises of bank borrowings, long-term notes payable, debt instruments like bonds, debentures, etc.

Answer and Explanation:


Answer:

The value of Sunset Roofing Inc's long-term debt is $35,459.

Explanation:

Sunset Roofing Inc. has shared the following information:

  • Total assets = $86,428
  • Current liabilities = $13,021
  • Total owner's equity = $37,948

Computation:

As per the balance sheet equation:

  • Owners' equity = Total assets - Total liabilities
  • Total liabilities = $86,428 - $37,948
  • Total liabilities = $48,480

And, as we know that total liabilities is the sum of long-term debt and the current liabilities, hence:

  • Total liabilities = Current liabilities + Long-term debt
  • Long-term debt = Total liabilities - Current liabilities
  • Long-term debt = $48,480 - $13,021
  • Long-term debt = $35,459

Learn more about this topic:

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Long-Term Debt: Definition, Cost & Formula

from Financial Accounting: Help and Review

Chapter 8 / Lesson 7
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