Question

The financial statements of Amy Inc. appear below: Amy Inc Comparative Balance Sheet December 31, Assets 2020 2019 Cash....................................................................................... $ 36,000 $ 33,000 Short-term investments .......................................................... 28,000 30,000 Accounts receivable (net)....................................................... 80,000 60,000 Supplies ................................................................................. 8,000 10,000 Inventories.............................................................................. 115,000 80,000 Prepaid Expenses .................................................................. 6,000 5,000 Property, plant and equipment (net)....................................... 297,000 218,000 Total assets ..................................................................... $570,000 $436,000 Liabilities and stockholders' equity Accounts payable................................................................... $ 87,000 $ 73,000 Short-term notes payable ....................................................... 15,000 17,000 Long-term bonds payable....................................................... 80,000 20,000 Common stock, $2 par value.................................................. 100,000 100,000 Preferred Stock, $100 par value............................................. 90,000 90,000 Retained earnings .................................................................. 198,600 136,000 Total liabilities and stockholders' equity ............................ $570,000 $436,000 Amy Inc Income Statement For the Year Ended December 31, 2020 Net sales ................................................................................ $940,000 Cost of goods sold.................................................................. 545,000 Gross profit............................................................................. 395,000 Expenses Depreciation Expense....................................................... $5,400 Salaries Expense.............................................................. 202,000 Interest expense ............................................................... 39,500 Other Operating expenses................................................ 27,100 Total expenses ............................................................ 274,000 Income before income taxes .................................................. 121,000 Income tax expense ............................................................... 36,000 Net income............................................................................. $ 85,000 Additional information: a. During 2020, Amy Inc. paid $10,000 cash dividends to its preferred shareholders and $22,000 cash dividends to its common shareholders c. Trading price of the common stock on December 31, 2020, was $15 per share. Instructions Using the above information, compute the following ratios for 2020: 1.Current ratio 4. Accounts receivable turnover 7. Earnings per Share 2.Inventory turnover 5. Average collection period 8. Price-earnings ratio 3.Profit margin 6. Average days inventory on hand 9. Times interest earned

Answer 1

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Amy Inc.
Income Statement	Amount $
Sales	940,000.00
Total Sales	940,000.00
Expenses
Cost of goods sold	545,000.00
Gross Margin	395,000.00
Depreciation Expense	5,400.00
Salaries Expense	202,000.00
Other Operating Expense	27,100.00
Earning before Interest & Taxes	160,500.00
Interest Expense	39,500.00
Net Income before taxes	121,000.00
Income tax	36,000.00
Net Income	85,000.00

Balance Sheet
Assets	2020	2019
Cash	36,000.00	33,000.00
Short-term investments	28,000.00	30,000.00
Accounts receivable, net	80,000.00	60,000.00
Supplies	8,000.00	10,000.00
Inventories	115,000.00	80,000.00
Prepaid Expenses	6,000.00	5,000.00
Current Assets	273,000.00	218,000.00
Property, plant and equipment (net)	297,000.00	218,000.00
Total Assets	570,000.00	436,000.00
Average Assets	503,000.00
Liabilities & Stockholders' Equity	2020	2019
Accounts payable	87,000.00	73,000.00
Short-term notes payable	15,000.00	17,000.00
Current Liabilities	102,000.00	90,000.00
Long-term bonds payable	80,000.00	20,000.00
Total Liabilities	182,000.00	110,000.00
Common stock, $2 par	100,000.00	100,000.00
Preferred Stock, $100 par	90,000.00	90,000.00
Retained earnings	198,000.00	136,000.00
Total Stockholders' Equity	388,000.00	326,000.00
Total Liabilities & Stockholders' Equity	570,000.00	436,000.00
	2020	2019
Accounts receivable, net	80,000.00	60,000.00
Average Accounts receivable, net	70,000.00
Common stock	100,000.00	100,000.00
Par value	2.00	2.00
Number of Common stock	50,000.00	50,000.00
Net Income	50,000.00
Less: dividends to Preference stock	10,000.00
Net Income available for common stock	40,000.00
Inventories	115,000.00	80,000.00
Average Inventory	97,500.00
Market price per share	15.00

	2020
Ans 1
Current Ratio	2.68
Current Assets/ Current Liabilities
Ans 4
Accounts Receivable Turnover	13.43
Sales/ Average Accounts Receivable
Ans 7
Earnings Per share	0.80
Net Income available for common stock/ Number of Common stock
Ans 2
Inventory Turnover	5.59
Cost of goods sold/ Average Inventory
Ans 5
Average collection period	27.18
365/ Accounts Receivable Turnover
Ans 8
Price-earnings ratio	18.75
Market price per share/ Earnings Per share
Ans 3
Profit margin	9.04%
Net Income/ Net Sales
Ans 6
Average days inventory on hand	65.30
365/ Inventory Turnover
Ans 9
Times Interest Earned	4.06
Earning before Interest & Taxes/Interest Expense