In: Accounting
LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2014 and 2015 |
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2015 | 2014 | |||
Gross sales | $ | 19,000 | $ | 15,000 |
Sales returns and allowances | 1,000 | 100 | ||
Net sales | $ | 18,000 | $ | 14,900 |
Cost of merchandise (goods) sold | 12,000 | 9,000 | ||
Gross profit | $ | 6,000 | $ | 5,900 |
Operating expenses: | ||||
Depreciation | $ | 700 | $ | 600 |
Selling and administrative | 2,200 | 2,000 | ||
Research | 550 | 500 | ||
Miscellaneous | 360 | 300 | ||
Total operating expenses | $ | 3,810 | $ | 3,400 |
Income before interest and taxes | $ | 2,190 | $ | 2,500 |
Interest expense | 560 | 500 | ||
Income before taxes | $ | 1,630 | $ | 2,000 |
Provision for taxes | 640 | 800 | ||
Net income | $ | 990 | $ | 1,200 |
LOGIC COMPANY Comparative Balance Sheet December 31, 2014 and 2015 |
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2015 | 2014 | |||
Assets | ||||
Current assets: | ||||
Cash | $ | 12,000 | $ | 9,000 |
Accounts receivable | 16,500 | 12,500 | ||
Merchandise inventory | 8,500 | 14,000 | ||
Prepaid expenses | 24,000 | 10,000 | ||
Total current assets | $ | 61,000 | $ | 45,500 |
Plant and equipment: | ||||
Building (net) | $ | 14,500 | $ | 11,000 |
Land | 13,500 | 9,000 | ||
Total plant and equipment | $ | 28,000 | $ | 20,000 |
Total assets | $ | 89,000 | $ | 65,500 |
Liabilities | ||||
Current liabilities: | ||||
Accounts payable | $ | 13,000 | $ | 7,000 |
Salaries payable | 7,000 | 5,000 | ||
Total current liabilities | $ | 20,000 | $ | 12,000 |
Long-term liabilities: | ||||
Mortgage note payable | 22,000 | 20,500 | ||
Total liabilities | $ | 42,000 | $ | 32,500 |
Stockholders’ Equity | ||||
Common stock | $ | 21,000 | $ | 21,000 |
Retained earnings | 26,000 | 12,000 | ||
Total stockholders’ equity | $ | 47,000 | $ | 33,000 |
Total liabilities and stockholders’ equity | $ | 89,000 | $ | 65,500 |
Calculate the asset turnover ratio. (Round your answers to the nearest hundredth.) |
2015 | 2014 | |
Asset turnover ratio |
Asset turn over 2014
Asset turnover ratio is the ratio of a company's sales to its assets. It is an efficiency ratio which tells how successfully the company is using its assets to generate revenue.
Asset turnover ratio = Net sales/ Total asset
= 14900/ 65500
= 0.23
So Asset turn over ratio is 0.23
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Asset turn over 2015
Average asset is calculated by adding beginning asset and ending asset and dividing it by 2
Let's put the values in the formula
Asset turnover ratio = [18000/ {(65500 + 89000)/2}]
= [18000/ {154500/ 2}]
= [18000/ 77250]
= 0.233
Asset turnover ratio is 0.19
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Hope this answer your query.
Feel free to comment if you need further assistance. J