Question

In: Accounting

Following is the balance sheet of Munoz Company for Year 3: MUNOZ COMPANY Balance sheet Assets...

Following is the balance sheet of Munoz Company for Year 3:

MUNOZ COMPANY
Balance sheet
Assets
Cash $ 15,200
Marketable securities 7,580
Accounts receivable 13,400
Inventory 11,200
Property and equipment 169,500
Accumulated depreciation (12,200 )
Total assets $ 204,680
Liabilities and Stockholders’ Equity
Accounts payable $ 8,690
Current notes payable 3,320
Mortgage payable 4,550
Bonds payable 21,240
Common stock 114,400
Retained earnings 52,480
Total liabilities and stockholders’ equity $ 204,680


The average number of common stock shares outstanding during Year 3 was 860 shares. Net income for the year was $15,000.

Required

Compute each of the following: (Round your answer to 2 decimal places. For percentages, 0.2345 should be entered as 23.45.)

a current ratio _____________
b earnings per share _____________ per share
c quick (acid- test) ratio _____________
d Return on investment _____________ %
e return on equity _____________ %
f debt to equity ratio _____________

Solutions

Expert Solution

S no. Ratio Formula
(a) Current ratio Current assets/Current liabilities

47,380/12,010

=3.95:1

(b) Earning per share Net income/Average outstanding shares

15,000/860

= $17.44

(c) Acid test ratio Quick assets/Current liabilities

36,180/12,010

= 3.01:1

(d) Return on Investment Net income/Cost of Investment

15,000/164,880*100

=9.10 %

(e) Return on equity Net income/Shareholders' equity

15,000/166,880*100

= 8.99%

(f) Debt to equity ratio Total liabilities/Total Equity

37,800/166,880

= 0.23:1

(1)Current assets:

Cash $15,200
Marketable securities 7,580
Account receivable 13,400
Inventory 11,200
Total current assets $47,380

(2) Quick assets = Current assets - Inventory

Quick assets = $47,380 - $11,200

Quick assets = $36,180

(3) Shareholders' Equity = Common stock + Retained earning

= $114,400+52,480

= $166,880

(4) Total liabilities = Short term debt+Long term debt

= 8,690+3,320+4,550+21,240

= 37,800

(5)Current liabilities:

Account payable $8,690
Current notes payable 3,320
Total current liabilities $12,010

(6) Investment = Property and Equipment(Net) + Marketable securities

= $157,300 + $7,580

= $164,880

Property and Equipment (Net), (169,500 - 12,200) = $157,300

Marketable securities = $7,580

Note:

  • Marketable securities is an investment
  • Mortgage payable and bond payable has been considered as long term Liabilities

Thank you :)


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