Question

Complete the following balance sheet using the information given. Round account balances to the nearest dollar.

Balance Sheet			Income Statement
Cash			Sales (All Credit)	$40,000
Accounts receivable			Cost of goods sold	20,000
Inventory			Operating expenses	12,000
Net fixed assets			Interest expense	200
Total assets			Taxes	2 730
			Net income	$5,070
Accounts payable
Short-term notes payable	$1,425		Ratios:
Long-term debt			Profit Margin =	12.675%
Common stock	$5,000		Return on Equity =	15%
Retained earnings			Quick Ratio =	1.2
Total Liabilities and equity			Return on Total Assets =	10%
			Fixed Asset Turnover =	1.6
			Current Ratio =	2
			Days Sales Outstanding =	45

Answer 1

Return on Equity = Net Income / Total Equity
0.15 = $5,070 / Total Equity
Total Equity = $33,800

Total Equity = Common Stock + Retained Earnings
$33,800 = $5,000 + Retained Earnings
Retained Earnings = $28,800

Return on Total Assets = Net Income / Total Assets
0.10 = $5,070 / Total Assets
Total Assets = $50,700

Fixed Asset Turnover = Sales / Net Fixed Assets
1.60 = $40,000 / Net Fixed Assets
Net Fixed Assets = $25,000

Total Assets = Current Assets + Net Fixed Assets
$50,700 = Current Assets + $25,000
Current Assets = $25,700

Current Ratio = Current Assets / Current Liabilities
2.00 = $25,700 / Current Liabilities
Current Liabilities = $12,850

Days Sales Outstanding = 365 * Accounts Receivable / Sales
45 = 365 * Accounts Receivable / $40,000
Accounts Receivable = $4,932

Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
1.20 = (Cash + $4,932) / $12,850
$15,420 = Cash + $4,932
Cash = $10,488

Current Liabilities = Accounts Payable + Short-term Notes Payable
$12,850 = Accounts Payable + $1,425
Accounts Payable = $11,425

Total Liabilities and Equity = Total Assets
Total Liabilities and Equity = $50,700

Total Liabilities and Equity = Current Liabilities + Long-term Debt + Total Equity
$50,700 = $12,850 + Long-term Debt + $33,800
Long-term Debt = $4,050

Current Assets = Cash + Accounts Receivable + Inventory
$25,700 = $10,488 + $4,932 + Inventory
Inventory = $10,280