Question

In: Accounting

Assets 2019 2018 Cash 175,000 88,000 Acc Receivable 130,000 102,000 INventory 127,600 173,000 Prepaid Expenses 8,800...

Assets 2019 2018

Cash 175,000 88,000

Acc Receivable 130,000 102,000

INventory 127,600 173,000

Prepaid Expenses 8,800 10,800

Total Current Assets 441,400 373,800

Plant and Equipment 248,000 130,000

Acc Dep.- Plant and Equip (54,000) (18,000)

Total Assets 635,400 585,800

Liabilities and equity

Accounts Payable 50,000 60,000

Wages Payable 12,000 30,000

Income Tax Payable 6,800 7,600

Total Current Liabilities 68,800 97,600

Notes Payable (Long Term) 60,000 120,000

Total Liabilities 128,800 217,600

Equity   

Common Stock $2 per value 440,000 320,000

Retained Earnings 66,600 48,200

Total Liabilities and Equity 635,700 585,800

Income Statement

Sales 1,356,000

COGS 822,000

Gross Profit 534,000

operating expenses

depreciation expenses 117,200

other expense 134,000

Total operating expenses 251,200

282,800

other gains (losses)  

gain on sale of car 4,000

income before taxes 286,000

income tax expense 87,780

NI 199,020

Question: calculate

1. working capital

2. current ratio

3. quick ratio

4. account receivable ratio

5. inventory turnover

6. days of sale inventory

7. eps of common stock

8. equity ratio

9.profit margin

10. gross margin

11. gross margin

12. return on total assets

13. return on common stock holders equity,

Solutions

Expert Solution

Answer :

1.

Working Capital = Current Assets - Current Liabilities.

Current assets $ 441,400.

Current Liabilities $ 68,800.

$441,400 -$68,800

, working Capital =$372,600.

2.

Current Ratio= Current Assets / Current Liabilities.

$441,400 / $$68,800

Current Ratio = 6.42

3.

Quick ratio = Quick assets / current liabilities.

Quick assets = Cash + Marketable securities + Accounts Receivable

$ 175,000 Cash + $ 130,000 Accounts Receivable + $0 ( no Marketable securities )

$ 305,000.

Current liabilities $ 68,800.

Quick ratio = $305,000 /$68,800.

Quick ratio = 4.43

4.

Accounts receivable turnover Ratio = Net Credit Sales / Avarage Accounts Receivable.

Net Credit Sales :$ 1,356,000 ( in absence of information all sale is considered as credit sales ).

Avarage Accounts receivable = $ 130,000 + $ 102,000 = $ 116,000

$ 1,356,000 / $ 116,000

Accounts Receivable turnover ratio = 11.69

5.

Inventory Turnover = COGS / Average inventory.

COGS = $ 822,000

Avarage Inventory = $ 127,600 + $ 173,000 / 2

$ 150,300.

Inventory Turnover = $822,000 / $150,300.

5.47..

6.

Days of sale inventory = Number of total days in year 365 /inventory Turnover ratio.

365 / 5.47 ( calculated in 5.)

Days of sale inventory = 66.73 days

7.

Earning per share for common stock = Net income - preferred Dividend / Weighted Average number of common shares outstanding.

Net income = $ 199,020 -$0 =$ 199,020.

Weighted average number of common shares = 220,000 ( $440,000 total share value / $2 per share ).

Earning per share = $199,020 / 220,000.

$ 0.90 per share.

8.

Equity Ratio = shareholders equity / total assets.

Shareholder Equity = $ 440,000 + $ 66,600 = $ 506,600.

Total assets = $ 635,400.

Equity Ratio = $506,600/ $ 635400

0.80

9.

Profit margin = Net profit / Net Sales.

Net Profit = $ 199,020.

Net sales = $ 1,356,000.

Profit margin = $ 199,020 / $ 1,356,000.

14.68%.

10.

Gross margin = gross Profit / net sales

Gross Profit = $ 534,000

Net sales = $ 1,356,000.

Gross margin = $ 534,000 / $ 1,356,000

39.38%

11. Gross margin same as 10.

12.

Return on total assets = Net income / total assets.

Net income = $ 199,020.

Total assets = $ 635,400.

Return on total assets = $ 199,020 / $ 635,400.

31.32%

13.

Return on common stock holders Equity = Net income / average common stock holders Equity

Net income = $ 199,020.

Avarage common stock holders Equity = $ 506,600* + $ 368,200** /2

$437,400.

Return on common stock holders Equity = Net income / average common stock holders Equity.

$ 199,020 / $ 437,400

45.50%

* Total of stocks holders Equity 2019 $ 440,000 + $ 66,600 = $ 506,600.

** Total of stocks holders Equity 2018 $ 320,000 + $ 48,200 = $ 368,200.

ekkarill92 answered 1 year ago
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