Presented here are the comparative balance sheets of Hames, Inc., at December 31
ID: 2397952 • Letter: P
Question
Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2017 and 2016. Sales for the year ended December 31, 2017, totaled $640,000.
281,000
a. Calculate ROI for 2017. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. Calculate ROE for 2017. (Round your answer to 1 decimal place.)
c. Calculate working capital at December 31, 2017.
d. Calculate the current ratio at December 31, 2017. (Round your answer to 2 decimal places.)
e. Calculate the acid-test ratio at December 31, 2017. (Round your answer to 2 decimal places.)
f. Assume that on December 31, 2017, the treasurer of Hames, Inc., decided to pay $15,000 of accounts payable. What impact, if any, this receipt will have on the answers you calculated for requirements a-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c.Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
g. Assume that instead of paying $15,000 of accounts payable on December 31, 2017. Hames, Inc., collected $15,000 of accounts receivable. What impact, if any, this receipt will have on the answers you calculated for requirements a-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c. Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
HAMES, INC.,Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 19,000 $ 20,000 Accounts receivable 78,000 72,000 Merchandise inventory 103,000 99,000 Total current assets $ 200,000 $ 191,000 Land 50,000 40,000 Plant and equipment 125,000 110,000 Less: Accumulated depreciation (65,000 ) (60,000 ) Total assets $ 310,000 $ 281,000 Liabilities Short-term debt $ 18,000 $ 17,000 Accounts payable 64,000 75,500 Other accrued liabilities 20,000 18,000 Total current liabilities $ 102,000 $ 110,500 Long-term debt 22,000 30,000 Total liabilities $ 124,000 $ 140,500 Stockholders’ Equity Common stock, no par, 100,000 shares authorized
40,000 and 25,000 shares issued, respectively $ 74,000 $ 59,000 Retained earnings: Beginning balance $ 81,500 $ 85,000 Net income for the year 50,500 1,500 Dividends for the year (20,000 ) (5,000 ) Ending balance $ 112,000 $ 81,500 Total stockholders’ equity $ 186,000 $ 140,500 Total liabilities and stockholders’ equity $ 310,000 $
281,000
Explanation / Answer
A
ROI
Numerator
/
denominator
ROI
Net Profit
/
Average Total Assets
ROI
2017
$ 50,500.00
/
(310000+281000)/2
17%
B
ROE
Numerator
/
denominator
ROE
Net Profit
/
Average equity during the year
ROE
2017
$ 50,500.00
/
(186000+140500)/2
31%
C
Working Capital
Current Assets
-
Current Liabilities
Working Capital
2017
$ 200,000.00
-
$ 102,000.00
$ 98,000.00
E
Current Ratio
Numerator
/
denominator
Current Ratio
Current Assets
/
Current liabilities
Current Ratio
2017
$ 200,000.00
/
$ 102,000.00
1.96
to 1
D
Acid Test Ratio
Numerator
/
denominator
Quick Ratio
Liquid Assets
/
Current liabilities
Quick Ratio
2017
$ 97,000.00
$ 102,000.00
0.95
to 1
Changes in the ratios if Accounts payable of $ 15000 are paid
Reason
ROI
No Effect
Profit does not have any effect with change in current asset or current liability value.
ROE
No Effect
Profit does not have any effect with change in current asset or current liability value.
Working Capital
No Effect
The changes in current asset and Current liability will be same.
Current Ratio
Ratio will Increase
Current Assets/Current liabilities
(200000-15000/102000-15000)
2.13
Changes in the ratios if $ 15000 are Received from Accounts Receivable paid
Reason
ROI
No Effect
Profit does not have any effect with change in current asset or current liability value.
ROE
No Effect
Profit does not have any effect with change in current asset or current liability value.
Working Capital
No Effect
The changes in current asset and Current liability will be same
Current Ratio
No Effect
The changes in current asset and Current liability will be same. Cash will increase by $ 15000 and receivables will decrease by $ 15000.
A
ROI
Numerator
/
denominator
ROI
Net Profit
/
Average Total Assets
ROI
2017
$ 50,500.00
/
(310000+281000)/2
17%
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