i\'m a little overwhelmed with this question and need some help (1) Use the foll
ID: 2352712 • Letter: I
Question
i'm a little overwhelmed with this question and need some help(1) Use the following information along with your knowledge of financial ratios and balance sheet relationships to fill in the missing items (a) through (x) on the balance sheet of Clapton Corp. Excel file (exam1-template.xlsx) contains the B/S. Please follow the definitions of ratios indicated in the information below. (show your formulae in Excel)
Information:
A. The current ratio (current assets divided by current liabilities, ending balances) at the end of 2011 was 1.86, compared to 1.96 at the end of 2010.
B. Net sales in 2011 were $20,000,000, compared to $18,000,000 in 2010.
C. The firm
Explanation / Answer
balance sheet
2011
2010
assets
current assets
cash
750,000
500,000
marketable securities
250,000
290,000
accounts rec
2,000,000
1,800,000
inventories
3,000,000
2,960,000
pre-pd expenes
510,000
428,000
total current assets
6,510,000
5,978,000
PPE
less accumulated depreciation
21,000,000
19,500,000
noncurret assets
long term rec
2,490,000
2,022,000
investments
1,250,000
1,000,000
other
0
1,500,000
total assets
31,250,000
30,000,000
liabilities and stockholders equity
current liabilities
accounts payable
1,750,000
1,500,000
wages and ee benefits payable
250,000
150,000
income taxes
850,000
750,000
advances and deposits
250,000
250,000
other current liabilities
400,000
400,000
total current liabilities
3500000
3,050,000
long term liabilities
long term debt
10,000,000
9,000,000
deferred income txes
1,200,000
1,000,000
other
4,250,000
500,000
total liabilities
15,450,000
13,550,000
stockholders equity
preferred stock
1,000,000
1,000,000
common stock
2,000,000
2,000,000
pd in capital
9,000,000
9,000,000
retained earnings
3,800,000
4,450,000
total stockholders equity
15,800,000
16,450,000
total liabilities and stockholders equity
31,250,000
30,000,000
income statement items
sales (given)
20,000,000
18,000,000
cost of gods sold
15,000,000
13,320,000
gross profit (given)
5,000,000
4,680,000
other epense and taxes (no need to calculate)
3,250,000
3,280,000
income after taxes before interest (given)
1,750,000
1,400,000
interest (no need to calculate)
A.
current ratio = current assets/current liabilities
For 2011: 1.86
For 2010: 1.96
For 2011,
1.86 = 6,510,000/current liabilities
2011 current liabilities = 6,510,000/1.86
2011 current liabilities = 3,500,000
C. Gross profit rate = gross profit/sales
For 2011: 25%
For 2010: 26%
2011 gross profit = 20,000,000*.25 = 5,000,000
2010 gross profit = 18,000,000*.26 = 4,680,000
cost of goods sold = sales - gross profit
2011 cost of goods sold = 20,000,000 - 5,000,00 = 15,000,000
2010 cost of goods sold = 18,000,000 - 4,860,000 = 13,320,000
D. gross profit - other expenses = income after tx but before interest
2011 other expenses = 5,000,000 - 1,750,000 = 3,250,000
2010 other expenses = 4,680,000 - 1,400,000
E. REturn on assets = EBIT/total assets
For 2011, 5.6%
2011 total assets = 1,750,000/.056 = 31,250,000
(g) PPE less accum deprecation for 2011: 31,250,000 - 6,510,000 - 2,490,000 - 1,250,000 = 21,000,000
F.
stock accounts (preferred, common, paid in capital) are same in 2010 as in 2011
total stockholders equity:
For 2011 =
1,000,000
+2,000,000
+9,000,000
+3,800,000
= 15,800,000
For 2010 =
1,000,000
+2,000,000
+9,000,000
+4,450,000
=16,450,000
Total liabilities and stockholders equity for 2010 = total liabilities + total stockholders equity = 13,550,000 + 16,450,000 = 30,000,000 for 2010
total current liabilities for 2010:
13,550,000 - 500,000 - 1,000,000 - 9,000,000 = 3,050,000
wages...payable for 2010 =
3,050,000
-1,500,000
-750,000
-250,000
-400,000
= 150,000
accounts payable for 2011 =
3500000
-250,000
-850,000
-250,000
-400,000
= 1,750,000
From current ratio,
for 2010
current assets = current liabilities*current ratio
total current assets for 2010 = 3,050,000*1.96 = 5,978,000
G. a/r turnover ratio = sales/AR
For 2011: 10 times
Accounts receivable for 2011 = sales/turnover ratio
Accounts receivable for 2011 = 20,000,000/10 = 2,000,000
H. Long-term debt to total asset ratio
For 2011 = .32
Long term debt for 2011 = total assets*.32
long term debt for 2011 = 31,250,000*.32 = 10,000,000
total assets = total liabilities and stockholders equity
2011 total liabilites and stockholders equity = 2011 total assets = 31,250,000
2011 total liabilities = total liabilities and stockholders equity - total stockholders equity
2011 total liaibliities = 31,250,000 -15,800,000 = 15,450,000
2011 other liabilites =
15,450,000
-10,000,000
-1,200,000
= 4,250,000
2010 total assets = 2010 total liabilities and stockholders equity = 30,000,000
2010 other assets =
30,000,000
-1,000,000
-2,022,000
-19,500,000
-5,978,000
= 1,500,000
I. inventory turnover ratio = cost of goods sold/inventory
for 2011, inventory turnover ratio = 5
for 2010, inventory turnover ratio = 4.5
2011 inventory = cost of goods sold/5
2011 inventory = 15,000,000/5 = 3,000,000
2010 inventory = 13,320,000/4.5 = 2,960,000
2011 cash =
6,510,000
-250,000
-2,000,000
-3,000,000
-510,000
=750,000
2010 marketable securities =
5,978,000
-500,000
-1,800,000
-2,960,000
-428,000
=290,000
balance sheet
2011
2010
assets
current assets
cash
750,000
500,000
marketable securities
250,000
290,000
accounts rec
2,000,000
1,800,000
inventories
3,000,000
2,960,000
pre-pd expenes
510,000
428,000
total current assets
6,510,000
5,978,000
PPE
less accumulated depreciation
21,000,000
19,500,000
noncurret assets
long term rec
2,490,000
2,022,000
investments
1,250,000
1,000,000
other
0
1,500,000
total assets
31,250,000
30,000,000
liabilities and stockholders equity
current liabilities
accounts payable
1,750,000
1,500,000
wages and ee benefits payable
250,000
150,000
income taxes
850,000
750,000
advances and deposits
250,000
250,000
other current liabilities
400,000
400,000
total current liabilities
3500000
3,050,000
long term liabilities
long term debt
10,000,000
9,000,000
deferred income txes
1,200,000
1,000,000
other
4,250,000
500,000
total liabilities
15,450,000
13,550,000
stockholders equity
preferred stock
1,000,000
1,000,000
common stock
2,000,000
2,000,000
pd in capital
9,000,000
9,000,000
retained earnings
3,800,000
4,450,000
total stockholders equity
15,800,000
16,450,000
total liabilities and stockholders equity
31,250,000
30,000,000
income statement items
sales (given)
20,000,000
18,000,000
cost of gods sold
15,000,000
13,320,000
gross profit (given)
5,000,000
4,680,000
other epense and taxes (no need to calculate)
3,250,000
3,280,000
income after taxes before interest (given)
1,750,000
1,400,000
interest (no need to calculate)
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