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LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2014 and 2015 2015 2014   Gross...

LOGIC COMPANY
Comparative Income Statement
For Years Ended December 31, 2014 and 2015
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
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

Solutions

Expert Solution

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

-----------------------------------------------------------------------------------------------------------------

Hope this answer your query.

Feel free to comment if you need further assistance. J


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