Question

The following items are taken from the financial statements of Sandhill Co. for 2022:

Accounts payable		$10,000
Accounts receivable		12,500
Accumulated depreciation—equipment		37,400
Advertising expense		21,300
Cash		13,800
Common stock		95,000
Depreciation expense		11,000
Dividends		14,300
Equipment		250,000
Insurance expense		3,900
Notes payable		89,500
Prepaid insurance		6,800
Rent expense		15,100
Retained earnings (beginning)		18,400
Salaries and wages expense		33,500
Salaries and wages payable		2,500
Service revenue		140,000
Supplies		4,900
Supplies expense		5,700

Can you explain ( Net Income, Retained Earnings , Current ratio , Debt to assets ratio , Earning per share ( outstanding was 10,000) )

Answer 1

1

Service revenue		$   140,000
Less: Expenses
Advertising expense	$   21,300
Depreciation expense	$   11,000
Insurance expense	$     3,900
Rent expense	$   15,100
Salaries and wages expense	$   33,500
Supplies expense	$     5,700
Total expenses		$     90,500
Net income		$     49,500

2.

Retained earnings, Beginning	$    18,400
Add: Net income	$    49,500
Less: Dividends	$ (14,300)
Retained earnings, Ending	$    53,600

3.

Accounts receivable	$   12,500
Cash	$   13,800
Prepaid insurance	$     6,800
Supplies	$     4,900
Total current assets	$   38,000

Accounts payable	$     10,000
Notes payable	$     89,500
Salaries and wages payable	$       2,500
Total current liabilities	$   102,000

Current ratio = Current assets / Current liabilities

Current ratio = $38,000 / $102,000

Current ratio = 0.37

Note payable consider as current liability

4.

Accounts receivable	$     12,500
Cash	$     13,800
Prepaid insurance	$       6,800
Supplies	$       4,900
Equipment	$   250,000
Accumulated depreciation—equipment	$   (37,400)
Total assets	$   250,600

Debt to assets = Total Liabilities / Total Assets

Debt to assets = $102,000 / $250,600

Debt to assets = 40.702%

5.

Earning per share = Net income / Number of shares outstanding

Earning per share = $49,500 / 10,000

Earning per share = $4.95

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