George Bailey Corporation experienced a fire on December 31, 2013, in which its

Question

George Bailey Corporation experienced a fire on December 31, 2013, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances.




December 31, 2013 December 31, 2012
Cash $ 30,000 $ 10,000
Receivables (net) 72,500 126,000
Inventory 200,000 180,000
Accounts payable 50,000 90,000
Notes payable 30,000 60,000
Common stock, $100 par 400,000 400,000
Retained earnings 113,500 101,000

Additional information:

1. The inventory turnover is 3.5 times.
2. The return on common stockholders

Explanation / Answer

(a) Cost of goods sold for 2013 $665,000 Inventory turnover = COGS/avg inventory 3.5 = COGS/190,000 COGS = 665,000 (b) Net sales (credit) for 2013 $ Receivable turnover = net sales/avg AR 8.8 = net sales/99,250 Net sales = 873,400 (c) Net income for 2013 $ Return on common stockholders equity = net income/average equity .24 = net income/(513,500 + 501,000)/2 = Net income = 121,740 (d) Total assets at December 31, 2013 $ return on assets = net income/avg total assets .20 = 121,740/(assets on 12/31/13 + 605,000)/2 .20 = 243,480/(assets on 12/31/13 + 605,000) .20*assets on 12/31/13 + 121,000 = 243,480 Assets on 12/31/13 = 612,400

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