Question

Financial statements for Allendale Company follow:

ALLENDALE COMPANY
Balance Sheets As of December 31
	2019				2018
Assets
Current assets
Cash	$	40,000			$	36,000
Marketable securities		20,000				6,000
Accounts receivable (net)		54,000				46,000
Inventories		135,000				143,000
Prepaid items		25,000				10,000
Total current assets		274,000				241,000
Investments		27,000				20,000
Plant (net)		270,000				255,000
Land		29,000				24,000
Total assets	$	600,000			$	540,000
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities
Notes payable	$	17,000			$	6,000
Accounts payable		113,800				100,000
Salaries payable		21,000				15,000
Total current liabilities		151,800				121,000
Noncurrent liabilities
Bonds payable		100,000				100,000
Other		32,000				27,000
Total noncurrent liabilities		132,000				127,000
Total liabilities		283,800				248,000
Stockholders’ equity
Preferred stock, (par value $10, 4% cumulative, non-participating; 8,000 shares authorized and issued)		80,000				80,000
Common stock (no par; 50,000 shares authorized; 10,000 shares issued)		80,000				80,000
Retained earnings		156,200				132,000
Total stockholders’ equity		316,200				292,000
Total liabilities and stockholders’ equity	$	600,000			$	540,000

ALLENDALE COMPANY
Statements of Income and Retained Earnings For the Years Ended December 31
	2019				2018
Revenues
Sales (net)	$	230,000			$	210,000
Other revenues		8,000				5,000
Total revenues		238,000				215,000
Expenses
Cost of goods sold		120,000				103,000
Selling, general, and administrative		55,000				50,000
Interest expense		8,000				7,200
Income tax expense		23,000				22,000
Total expenses		206,000				182,200
Net earnings (net income)		32,000				32,800
Retained earnings, January 1		132,000				107,000
Less: Preferred stock dividends		3,200				3,200
Common stock dividends		4,600				4,600
Retained earnings, December 31	$	156,200			$	132,000

Required

Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018 balance sheet.

Working capital.

Current ratio. (Round your answers to 2 decimal places.)

Quick ratio. (Round your answers to 2 decimal places.)

Receivables turnover (beginning receivables at January 1, 2018, were $47,000). (Round your answers to 2 decimal places.)

Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)

Inventory turnover (beginning inventory at January 1, 2018, was $140,000). (Round your answers to 2 decimal places.)

Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)

Debt to assets ratio. (Round your answers to the nearest whole percent.)

Debt to equity ratio. (Round your answers to 2 decimal places.)

Number of times interest was earned. (Round your answers to 2 decimal places.)

Plant assets to long-term debt. (Round your answers to 2 decimal places.)

Net margin. (Round your answers to 2 decimal places.)

Turnover of assets. (Round your answers to 2 decimal places.)

Return on investment. (Round your answers to 2 decimal places.)

Return on equity. (Round your answers to 2 decimal places.)

Earnings per share. (Round your answers to 2 decimal places.)

Book value per share of common stock. (Round your answers to 2 decimal places.)

Price-earnings ratio (market price per share: 2018, $11.75; 2019, $12.50). (Round your intermediate calculations and final answer to 2 decimal places.)

Dividend yield on common stock. (Round your answers to 2 decimal places.)

Answer 1

		2018	2019
1	Cash	40,000.00	36,000.00
2	Marketable securities	20,000.00	6,000.00
3	Accounts receivable (net)	54,000.00	46,000.00
4	Inventories	135,000.00	143,000.00
5	Prepaid items	25,000.00	10,000.00
6	Total current assets	274,000.00	241,000.00
7	Total Quick Assets	114,000.00	88,000.00
8	Investments	27,000.00	20,000.00
9	Plant (net)	270,000.00	255,000.00
10	Land	29,000.00	24,000.00
11	Total Non-Current assets	326,000.00	299,000.00
12	Total assets	600,000.00	540,000.00
13	Notes payable	17,000.00	6,000.00
14	Accounts payable	113,800.00	100,000.00
15	Salaries payable	21,000.00	15,000.00
16	Total current liabilities	151,800.00	121,000.00
17	Bonds payable	100,000.00	100,000.00
18	Other	32,000.00	27,000.00
19	Total noncurrent liabilities	132,000.00	127,000.00
20	Total liabilities	283,800.00	248,000.00
21	Preferred stock	80,000.00	80,000.00
22	Common stock	80,000.00	80,000.00
23	Retained earnings	156,200.00	132,000.00
24	Total stockholders’ equity	316,200.00	292,000.00
25	Total liabilities and stockholders’ equity	600,000.00	540,000.00
26	Sales (net)	230,000.00	210,000.00
27	Other revenues	8,000.00	5,000.00
28	Total revenues	238,000.00	215,000.00
29	Cost of goods sold	120,000.00	103,000.00
30	Selling, general, and administrative	55,000.00	50,000.00
31	Profit Before Interest and Tax	63,000.00	62,000.00
32	Interest expense	8,000.00	7,200.00
33	Income tax expense	23,000.00	22,000.00
34	Net earnings (net income)	32,000.00	32,800.00
35	Retained earnings, January 1	132,000.00	107,000.00
36	Less: Preferred stock dividends	3,200.00	3,200.00
37	Common stock dividends	4,600.00	4,600.00
38	Retained earnings, December 31	156,200.00	132,000.00
39	Market Price Per Share	11.75	12.50
40	No. of Equity Share	10,000.00	10,000.00
41	Current ratio (6/16)	1.81	1.99
42	Quick Ratio( 7/16)	0.75	0.73
43	Receivables turnover(26/3)	4.26	4.57
44	Average days to collect accounts receivable(365/42)	85.70	79.95
45	Inventory turnover(26/4)	1.70	1.47
46	Number of days to sell inventory(365/44)	214.24	248.55
47	Debt to assets ratio(20/12)	0.47	0.46
48	Debt to equity ratio(20/24)	0.90	0.85
49	Number of times interest was earned(31/32)	7.88	8.61
50	Plant assets to long-term debt(19/9)	0.49	0.39
51	Net margin((34-36)/26	0.13	0.14
52	Turnover of assets(26/12)	0.38	0.39
53	Return on investment((34-36)/(12-16))	6.43%	7.06%
54	Return on equity((34-36)/(22+23))	12%	14%
55	Earnings per share((34-36)/40)	2.88	2.96
56	Book value per share of common stock((22+23)/40)	23.62	21.20
57	Price-earnings ratio(39/55)	4.08	4.22
58	Dividend Yield(37/39)	2%	2%

Notes:

1	Assumed 365 days in a year
2	All sales are in credit credit
3	The margin is calculated in Sales Revenue only

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