Question

Category	Prior year	Current year
Accounts payable	41,400	45,000
Accounts receivable	115,200	122,400
Accruals	16,200	13,500
Additional paid in capital	200,000	216,660
Cash	???	???
Common Stock @ par value	37,600	42,000
COGS	131,400	175,511.00
Depreciation expense	21,600	23,085.00
Interest expense	16,200	16,974.00
Inventories	111,600	115,200
Long-term debt	135,000	138,052.00
Net fixed assets	378,667.00	399,600
Notes payable	59,400	64,800
Operating expenses (excl. depr.)	50,400	65,892.00
Retained earnings	122,400	136,800
Sales	255,600	335,712.00
Taxes	9,900	18,931.00

What is the current year's return on assets (ROA)?

What is the current year's return on equity (ROE)?

What is the current year's entry for long-term debt on a common-sized balance sheet?

Answer 1

Answer 1)

Current Year ROA = Net Income / Average Total Assets *100

Net Income =

Gross Profit = Sales - COGS

Gross Profit = 335,712 - 175,511 = 160,201

Net Profit = Gross Profit - Operating Expenses - Depreciation - Interest - Taxes

Net Profit = 160,201 - 65,892 - 23085 - 16974 - 18931 = 35,319

Current Year Total Assets = Liabilities + Equity

= Accounts Payable + Accruals + Additional paid in capital + Common stock + long Term Debt + Notes Payable + Retained Earnings

= 45,000 + 13,500 + 42,000 + 216,660 + 138,052 + 64,800 + 136,800 = 656,812

Prior Year Total Assets = Prior year liab + Prior year equity

= Accounts Payable + Accruals + Additional paid in capital + Common stock + long Term Debt + Notes Payable + Retained Earnings

= 41,400 + 16,200 + 200,000 + 37,600 + 135,000 + 59,400 + 122,400 =  612,000

Average Total Assets = (656,812 + 612,000) / 2

Average Total Assets = 634,406

Current Year ROA = 35,319 / 634,406 *100 = 5.57%

Answer 2)

Current Year ROE = Net Income / Total Equity *100

Current Year Total Equity = Common Stock + additional paid in capital + Retained Earnings

= 42,000+216,660+136,800 = 395,460

Current Year ROE = 35,319 / 395,460 * 100 = 8.93%

Answer 3)

A common size balance sheet represent the line item as a percentage of the total value. it is used to evaluate financial statements. Long Term Debt will be expressed as a percentage of Total Liabilities and Shareholder's equity.

Long Term Debt in monetary terms will be 138,052

Long Term Debt in % terms as a % of Total Liab and Shareholder's Equity will be 21.02%

Working

Total Liabilities and Shareholder's Equity = 656,812

Long Term Debt = 138.052

% = 138,052/656,812 = 21.02%