1. The following is located under the Stockholder\'s Equity section of a balance
ID: 2386943 • Letter: 1
Question
1. The following is located under the Stockholder's Equity section of a balance sheet:Preferred 3% stock, $100 par $102,000
Common stock, $50 par $549,900
A. How many shares of common stock does this corporation have?
B. How many shares of Preferred stock does this corporation have?
C. What is the total dividend that will be paid for Preferred stock?
D. If the Preferred stock listing stated $3 instead of 3% would that change the total dividend amount? Why?
2.
Balance Sheet:
Cash
2010: $27,000
2009: $33,000
Short-term investments
2010: 22,000
2009: 28,000
Net receivables
2010: 54,000
2009: 72,000
Inventory
2010: 65,000
2009:42,000
Prepaid expenses
2010: 7,000
2009: 9,000
Total current assets
2010: 175,000
2009: 184,000
Total current liabilities
2010: 87,500
2009: 92,000
Income Statement:
Net credit sales
$554,800
Cost of goods sold
331,700
1. What is the current ratio for 2010?
2. What is the quick ratio for 2010?
3. What is the inventory turnover for 2010?
4. What is the accounts receivable turnover for 2010?
Please show all your work, not just the answer.
Explanation / Answer
1.
A) $549,900 / $50 = 10,998 shares of common stock.
B) $102,000 / $100 = 1020 shares of preferred stock.
C) 3% X $102,000 = 0.03 X $102,000 = $3060
D) No it would not change the total dividend amount. $3 X 1020 shares = $3060 which is the same as the 3% dividend. 3% of the $100 dollar par value = $3, that is why they are the same.
2.
1. Current Ratio = Current Assets / Current Liabilities
= $175,000 / $87,500 = 2
2. Quick Ratio = (Current Assets - Inventory) / Current Liabilities
=($175,000 - $65,000) / $87,500 = $110,000 / $87,500
= 1.26 (Assuming rounding to 2 decimal places)
3. Inventory Turnover = Cost of goods sold / Average Inventory
= $331,700 / (($65,000 + $42,000) / 2 )
=$331,700 / ($107,000 / 2) = $331,700 / $53,500
= 6.2
4. Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable
=$554,800 / (($54,000 + $72,000) / 2)
=$554,800 / ($126,000 / 2) = $554,800 / $63,000
= 8.81 (Assuming round to 2 decimal places)
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