Question

In: Accounting

Listed below are the balance sheet and statement of operations for Wynn Memorial Nursing Home for...

Listed below are the balance sheet and statement of operations for Wynn Memorial Nursing Home for 2008 and 2009.

Wynn Memorial Nursing Home
Balance Sheet (in 000)
For the Years Ending December 31, 2009 and 2008
2009 2008
Current Assets:
   Cash and Cash Equivalents $30 $50
   Net Patient Receivables 295 235
   Prepaid Expenses 80 80
Total Current Assets 405 365
Plant, Property, & Equipment
   Gross Plant, Property, & Equipment 350 300
   (less Accumulated Depreciation) -70 -50
Net Plant, Property, & Equipment 280 250
Construction in Progress 203 0
Total Assets $888 $615
Current Liabilities:
   Accounts Payable $220 $190
   Salaries Payable 75 50
Total Current Liabilities 295 240
Long-Term Liabilities:
   Bonds Payable 100 20
Total Long-Term Liabilities 100 20
Net Assets 493 355

Total Liabilities and Assets                           888          615

Exhibit 4-19a Statement of Operations for Wynn Memorial Nursing Home
Wynn Memorial Nursing Home
Statement of Operations (in 000)
For the Years Ended December 31, 2009 and 2008
2009 2008
Revenues:
   Net Patient Service Revenue $1,400 $1,200
   Other Revenue 200 200
Total Revenues 1,600 1,400
Expenses:
   Nursing Services 1,320 1,150
   Administrative Services 110 100
   Depreciation 20 15
   General Services 50 35
Total Expenses 1,500 1,300
Operating Income 100 100
Excess of Revenues over Expenses 100 100
Increase in Net Assets $100 $100


1.   Compute Wynn Memorial Nursing Home’s current ratio.

2.   Compute Wynn Memorial Nursing Home’s days in accounts receivable.

3.   Compute Wynn Memorial Nursing Home’s long-term debt to net assets ratio.

4.   Compute Wynn Memorial Nursing Home’s net assets to total assets ratio.

5.   Compute Wynn Memorial Nursing Home’s total asset turnover ratio.

6.   Compute Wynn Memorial Nursing Home’s fixed asset turnover ratio.

7.   Compute Wynn Memorial Nursing Home’s return on total assets.

8.   Compute Wynn Memorial Nursing Home’s operating margin.

Listed below are the industry standards of the above ratios for Wynn Memorial’s peer group. Use this information make comparisons.

Solutions

Expert Solution

Answer to Part 1.

Current Ratio = Current Assets / Current Liabilities

December 31, 2008:
Current Ratio = 365 / 240
Current Ratio = 1.52: 1

December 31, 2009:
Current Ratio = 405 / 295             
Current Ratio = 1.37: 1

Answer to Part 2.

Days’ in Accounts Receivable = 365 * Average Accounts Receivable / Net Sales

December 31, 2009:
Average Accounts Receivable = (295 + 235) / 2
Average Accounts Receivable = $265

Days’ in Accounts Receivable = 365 * 265 / 1,400
Days’ in Accounts Receivable = 69.09 or 69 days

Answer to Part 3.

Long Term Debt to Net Assets Ratio = Long Term Debt / Net Assets

December 31, 2008:
Long Term Debt to Net Assets Ratio = 20 / 355
Long Term Debt to Net Assets Ratio = 0.06 times

December 31, 2009:
Long Term Debt to Net Assets Ratio = 100 / 493
Long Term Debt to Net Assets Ratio = 0.20 times

Answer to Part 4.

Net Assets to Total Assets Ratio = Net Assets / Total Assets

December 31, 2008:
Net Assets to Total Assets Ratio = 355/ 615
Net Assets to Total Assets Ratio = 0.58 times

December 31, 2009:
Net Assets to Total Assets Ratio = 493/ 888
Net Assets to Total Assets Ratio = 0.56 times

ekkarill92 answered 1 year ago
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