Question
In: Accounting
Exercise 3-16 (Static) Calculating ratios [LO3-8] The 2021 balance sheet for Hallbrook Industries, Inc., is shown...
Exercise 3-16 (Static) Calculating ratios [LO3-8]
The 2021 balance sheet for Hallbrook Industries, Inc., is shown
below.
| HALLBROOK INDUSTRIES, INC. | |||
| Balance Sheet | |||
| December 31, 2021 | |||
| ($ in thousands) | |||
| Assets | |||
| Cash | $ | 200 | |
| Short-term investments | 150 | ||
| Accounts receivable | 200 | ||
| Inventory | 350 | ||
| Property, plant, and equipment (net) | 1,000 | ||
| Total assets | $ | 1,900 | |
| Liabilities and Shareholders’ Equity | |||
| Current liabilities | $ | 400 | |
| Long-term liabilities | 350 | ||
| Paid-in capital | 750 | ||
| Retained earnings | 400 | ||
| Total liabilities and shareholders’ equity | $ | 1,900 | |
The company’s 2021 income statement reported the following amounts
($ in thousands):
| Net sales | $ | 4,600 | |
| Interest expense | 40 | ||
| Income tax expense | 100 | ||
| Net income | 160 | ||
Required:
1. Calculate the current ratio. (Round
your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round
your answer to 3 decimal places.)
3. Calculate the debt to equity ratio.
(Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio.
(Round your answer to 1 decimal place.)
Solutions
Expert Solution
Answer of Part 1:
Current Assets = Cash + Short term Investments + Accounts
Receivable + Inventory
Current Assets = $200 + $150 + $200 + $350
Current Assets = $900
Current Liabilities = $400
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $900 / $400
Current Ratio = 2.25
Answer of Part 2:
Acid Test Ratio = (Current Assets – Inventory) / Current
Liabilities
Acid Test Ratio = ($900 - $350) / $400
Acid Test Ratio = $550 / $400
Acid Test Ratio = 1.375
Answer of Part 3:
Equity = Paid in Capital + Retained Earnings
Equity = $750 + $400
Equity = $1,150
Total Liabilities = Current Liabilities + Long term
Liabilities
Total Liabilities = $400 + $350
Total Liabilities = = $750
Debt to Equity Ratio = Total Liabilities / Total Equity
Debt to Equity Ratio = $750 / $1,150
Debt to Equity Ratio= 0.65
Answer of Part 4:
EBIT = Net Income + Income Tax Expense + Interest Expense
EBIT = $160 + $100 + $40
EBIT = $300
Times Interest Earned Ratio = EBIT / Interest Expense
Times Interest Earned Ratio = $300 / $40
Times Interest Earned Ratio = 7.5 times
ekkarill92 answered 2 years agoRelated Solutions
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Account Title
Debits
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Cash
$
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Accounts receivable
39,000
Inventory
45,000
Prepaid insurance
15,000
Equipment
100,000
Accumulated depreciation
$
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Patent (net)
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Accounts payable
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Interest payable
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Notes payable (due in 10 years)
100,000
Common stock
70,000
Retained earnings
76,000
Totals
$
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$
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a. Calculate the current ratio.
b. Calculate the acid-test ratio....
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below.
HALLBROOK INDUSTRIES, INC.
Balance Sheet
December 31, 2021
($ in thousands)
Assets
Cash
$
330
Short-term investments
280
Accounts receivable
330
Inventory
360
Property, plant, and equipment (net)
2,300
Total assets
$
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Liabilities and Shareholders’
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Current liabilities
$
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Long-term liabilities
480
Paid-in capital
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Retained earnings
1,190
Total liabilities and shareholders’ equity
$
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The company’s 2021 income statement reported the following amounts
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Required:
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Assets
Cash
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Accounts receivable
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Inventory
220,000
Furniture and fixtures (net)
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Notes payable
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Assets
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$
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Accounts receivable
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Inventory
210,000
Furniture and fixtures (net)
150,000
Total assets
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At
December 31, 2018
($
in 000s)
Assets
Current assets:
Cash
$
3,250
Accounts receivable
7,500
Allowance for uncollectible
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Finished goods inventory
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Prepaid expenses
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Assets
Current assets:
Cash
$
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Accounts receivable
4,100
Allowance for uncollectible accounts
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Prepaid expenses
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At
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($
in 000s)
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Accounts
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Assets
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Cash
$
2,950
Accounts receivable
6,900
Allowance for uncollectible accounts
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Prepaid expenses
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$33
Accounts receivable (net)
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Inventories
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Land
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Equipment
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