Question

1. Fill in the blanks in the following Income Statement and Balance Sheet for Screven Industries. Assume that there are 360 days in a year and that Credit Sales are 75% of total sales.

Net Income is $1,200,000

Cash                            $750,000         Current Debt               ________

Acct. Rec.                   _________      L-T Debt                     ________

Inventory                    _________      Total Debt                   ________

T. Current Assets        _________      Stockholders’ Equity ________

Net Fixed Assets         _________      Total Debt and

Total Assets                _________      Stockholders’ Equity ________

Total Asset Turnover                    2.5             ACP                            30 days

NPM                                             10%           Inventory T/O             6

GPM                                             25%           Current Ratio              5

ROE                                              .40             ROA                            .25

Answer 1

Ans: Return On assets= Net income/total assets

.25=1,200,000/ total assets

Total Assets= 1,200,000/0.25

Total Assets= 4,800,000

Total assets turnover= Sales/ total assets

2.5= sales/4,800,000

Sales= 12,000,000

Credit Sales= 75% of sales

Credit Sales= 75% of 12,000,000

Credit Sales= 9,000,000

Inventory turnover ratio= Net Sales/ inventory

Average inventory= 12,000,000/6

average inventory= 2,000,000

Return On equity= net income/Average equity

0.40= Net income/ Average Equity

Average equity= 1,200,000/ 0.40

equity= 3,000,000

Average collection period= Average accounts receivables/total credit sales*360

Average Accounts receivables= 9,000,000/360*30

Average Accounts Receivable= 750,000

Total Current Assets= cash+ inventory+ accounts receivables

=> total current Assets= 750,000+750,000+2,000,000

Total Current Assets= 3,500,000

Current Ratio= Current Assets/ current liability

5= 3,500,000/ c.l

Current Liability= 700,000

Net fixed Assets= total assets- current Assets

Net fixed Assets= 4,800,000-{3,500,000}

Net fixed Assets= 1,300,000

Current Debt= 700,000

Total debt and stockholder equity= total assets

Total debt and stockholder equity= 4,800,000

Total debt= 4,800,000- 3,000,000

Total Debt= 1,800,000

long term debt= total debt- current debt

Long term debt= 1,800,000-700,000

Long term debt= 1,100,000