Question

Baxter Equipment Company - Balance Sheet for Years Ending December 31st

Note: All figures add 3 zeros ($000)

	2019	2018
Assets
Cash	$50	$55
Marketable Securities	$0	$25
Accounts Receivable	$350	$315
Inventories	$300	$215
Total Current Assets	$700	$610
Plant & Equipment (at cost)	$1,800	$1,470
Less Ac. Depreciation	$500	$400
Net Plant & Equipment	$1,300	$1,070
Total Assets	$2,000	$1,680
Liabilities & Stockholder Equity
Accounts Payable	$60	$30
Notes Payable	$100	$60
Accruals	$140	$130
Total Current Liabilities	$300	$220
Long-Term Debt (loans) Total	$800	$580
Total Liabilities	$1,100	$800
Preferred Stock [20,000 shares, ($1 par)]	$20	$20
Common Stock [50,000 shares, ($1 par)]	$50	$50
Paid in Capital in excess of Par	$80	$80
Retained Earnings	$750	$730
Total Stockholders Equity	$900	$880
Total Liabilities & Stockholder's Equity	$2,000	$1,680

Please answer what you can. The data is too long for me to add the Income Statement, which is necessary for these questions. Since many of these questions cannot be answered without the IS, and they all pertain to the same data - this should be counted as one question.

a. What was the company's depreciation expense for 2019?

b. What were the company's current ratios for both 2018 and 2019?

c. Was the current ratio for year 2019 better or worse compared to 2018 (a one word answer please)

d. What was the company's inventory turnover for 2019?

e. What was the average collection period (2019) for their accounts receivable?

f. What was their marginal tax rate?

g. How many shares of common stock did they sell in 2019?

h. What was their EPS?

i. How much did they pay in common stock dividends?

j. What was their "TIE" (times interest earned) for 2019?

Answer 1

A-$100000 as accumulated depreciation increased from 400000 to 500000

B-CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITIES

IN 2018 CURRENT RATIO=610000-220000=390000

IN 2019 CURRENT RATIO=700000-300000=400000

C-BETTER

D-INVENTORY TURNOVER=SALES/AVERAGE INVENTORY

AVERAGE INVENTORY=(OPENING INVENTORY+CLOSING INVENTORY) /2

OPENING INVENTORY ie of year 2018=215000

CLOSING INVENTORY ie of year 2019=300000

AVERAGE INVENTORY =(215000+300000)/2=257500

IN 2019 INVENTORY TURNOVER=SALES(figures for the year 2019 as per income statement)/257500

E-AVERAGE COLLECTION PERIOD=(AVERAGE ACCOUNTS RECEIVABLES/TOTAL CREDIT SALES) *NUMBER OF DAYS

AVERAGE ACCOUNTS RECEIVABLES=(OPENING ACCOUNTS RECEIVABLES+CLOSING ACCOUNTS RECEIVABLES) /2

OPENING ACCOUNTS RECEIVABLES ie of year 2018=315000

CLOSING ACCOUNTS RECEIVABLES ie of year 2019=350000

AVERAGE ACCOUNTS RECEIVABLES =(315000+350000)/2=332500

IN 2019 AVERAGE COLLECTION PERIOD=(332500/TOTAL CREDIT SALES(figures for the year 2019 as per income statement))*365(assumed 365 days in an year)

F-MARGINAL TAX RATE to be determined from Income Statement.

G-THE COMMON STOCK DID NOT INCREASE DURING THE YEAR ie had opening 50000 shares & same 50000 shares were the closing.HENCE THE COMMON STOCK WERE NOT SOLD DURING 2019.

H-EPS=EARNINGS ATTRIBUTABLE TO COMMON STOCK HOLDERS/NUMBER OF COMMON SHARES

IT CANNOT BE CALCULATED WITHOUT INCOME STATEMENT. BUT JUST TRYING AN ALTERNATIVE

SINCE RETAINED EARNINGS INCREASED FROM 730000 TO 750000 (ASSUMING IT IS THE EARNINGS ATTRIBUTABLE TO COMMON STOCK HOLDERS ie after all expenses including tax & any payment to Preferred Share Holders.),therefore EARNINGS ATTRIBUTABLE TO COMMON STOCK HOLDERS=20000

EPS=20000/50000=0.40

I-IT CANNOT BE ANSWERED WITHOUT INCOME STATEMENT.

J-TIE=EARNINGS BEFORE INTEREST & TAX(EBIT)/INTEREST EXPENSE FOR THE YEAR

IT CANNOT BE CALCULATED WITHOUT INCOME STATEMENT AS FIGURES MISSING