Question

1. Cash=20   A/R = 10    merchandise=30   land =60    short-term investments=40

Current liabilities= 20.      Find the current ratio.

2. Quick assets=50    A/P= 10   taxes payable=10   long term bond payable=30

Find the quick ratio.

3. Inventory( Jan 1)=80      Inventory (Dec 31)=60       COGS=280

Find inventory turnover

4. Inventory turnover=20 . Find days’ sales in inventory ( use 360 days)
5. Average assets= 100      sales =70   , net income=8, gross profit=10. Find return on assets.
6. Sales=300, gross profit=90, net income=60. Find return on sales
7. Operating income=200,   tax expense= 40, interest expense=50. Find times interest earned
8. Base year is    2017

    2017 sales= 5,000

    2018 sales= 4700

    2019 sales= 4,900

  2020 sales 5500.

    Find the Index # for 2020

Answer 1

1)
Current Assets
Cash	20
A/R	10
Merchandise	30
Short term investment	40
Total Current Assets	100
Current liabilities	20
Current Ratio = Current Assets/Current Liabilities
Current Ratio = 100/20	5	X
2)
A/P	10
Taxes Payable	10
Total current Liabilities	20
Quick Assets	50
Quick Ratio = Quick Assets/ Current liabilities
Quick Ratio = 50/20	2.5	X
3)
inventory turnover = COGS/ Average Inventory
inventory turnover = 280/ ((80+60)/2)	4.00	times
4)
Days in sales in inventory = 360 Days/ Inventory turnover
Days in sales in inventory  = 360/ 20	18	days
5)
Average assets= 100      sales =70   , net income=8, gross profit=10. Find return on assets
ROA = Net Income/Average Assets = 8/100	8.00%
6)
Sales=300, gross profit=90, net income=60. Find return on sales
Return on Sales = Net Income/Sales = 60/300	20%
7)
Operating income=200,   tax expense= 40, interest expense=50. Find times interest earned
Times Interest Earned = Operating Income/Interest Exp
Times Interest Earned = 200/50	4.00	times
8)
Index for 2020 = Sales for 2020/Base year sales = 5500/5000 x 100	110