Question

Pepper Company provided the incomplete financial statements shown below as well as the following additional information:

1. All sales during the year were on account.
2. There was no change in the number of shares of common stock outstanding during the year.
3. The interest expense on the income statement relates to the bonds payable; the amount of bonds outstanding did not change during the year.
4. Selected balances at the beginning of the current year were:

Accounts receivable	$	350,000
Inventory	$	460,000
Total assets	$	2,560,000

e. Selected financial ratios computed from the statements below for the current year are:

Earnings per share	$	5.76
Debt-to-equity ratio		0.920
Accounts receivable turnover		16.0
Current ratio		2.20
Return on total assets		10	%
Times interest earned ratio		10.0
Acid-test ratio		1.20
Inventory turnover		9.0

Required:

Compute the missing amounts on the company's financial statements. (Hint: What’s the difference between the acid-test ratio and the current ratio?) (Do not round intermediate calculations.)

Pepper Industries
Income Statement
For the Year Ended March 31
Sales	$4,900,000
Cost of goods sold
Gross margin	66
Selling and administrative expenses	66
Net operating income	77
Interest expense	64,000
Net income before taxes
Income taxes (40%)	6,000
Net income

	Pepper Industries Balance Sheet March 31 Current assets: Cash Accounts receivable, net Inventory 33 Total current assets Plant and equipment, net Total assets Liabilities: Current liabilities $280,000 Bonds payable, 10% Total liabilities Stockholders’ equity: Common stock, $2.90 par value Retained earnings Total stockholders’ equity Total liabilities and stockholders' equity

NOTE: 4 boxes will not be able to calculate correctly: Net Operating Income, Net Income before Taxes, Income Taxes, Net Income. Your balance sheet will not balance. Try your best with the information you are given please.

Answer 1