Question

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

FANNING COMPANY Balance sheet
Assets
Cash	$	14,650
Marketable securities		8,380
Accounts receivable		12,620
Inventory		11,500
Property and equipment		167,000
Accumulated depreciation		(12,600	)
Total assets	$	201,550
Liabilities and Stockholders’ Equity
Accounts payable	$	8,420
Current notes payable		3,040
Mortgage payable		4,300
Bonds payable		21,600
Common stock		113,700
Retained earnings		50,490
Total liabilities and stockholders’ equity	$	201,550

The average number of common stock shares outstanding during Year 3 was 890 shares. Net income for the year was $14,500.

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__________

Answer 1

1.

Current Assests	Amount ($)		Current Liabilities	Amount ($)
Cash	14650		Account payable	8420
Marketable securities	8380		Current notes payable	3040
Account receivables	12620		Total	11460
Inventory	11500
Total	47150		Current Ratio	4.11

2.

Particulars	Amount ($)
Net Income	14500
Number of common stock	890
Earning per share	16.29

3.

Liquid Current Assests	Amount ($)		Current Liabilities	Amount ($)
Cash	14650		Account payable	8420
Marketable securities	8380		Current notes payable	3040
Account receivables	12620		Total	11460
Total	35650
			Quick ratio	3.11

4.

Particulars	Amount ($)
Net Income	14500
Total Investment	167000
Return on Investment	8.68%

5.

Particulars	Amount ($)
Net Income	14500
Common stock	113700
Return on equity	12.75%

6

Total Liabilities	Amount ($)		Share holder equity	Amount ($)
Account payable	8420		Common stock	113700
Current notes payable	3040		Retained earning	50490
Mortage Payable	4300		Total	164190
Bond Payable	21600
Total	37360
Debt to Equity ratio		0.23