Exercise 13-18 SKYSONG COMPANY BALANCE SHEET Dec. 31, 2017 Dec. 31, 2016 INCOME

Question

Exercise 13-18

SKYSONG COMPANY
BALANCE SHEET

Dec. 31, 2017

Dec. 31, 2016

INCOME STATEMENT
FOR THE YEAR ENDED 2017

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Exercise 13-18

Skysong Company’s condensed financial statements provide the following information.

SKYSONG COMPANY
BALANCE SHEET

Dec. 31, 2017

Dec. 31, 2016

Cash $ 51,900 $ 60,300 Accounts receivable (net) 199,900 79,400 Short-term investments 79,400 40,000 Inventory 437,800 356,600 Prepaid expenses 3,000 7,100    Total current assets $ 772,000 $ 543,400 Property, plant, and equipment (net) 854,600 855,200    Total assets $1,626,600 $1,398,600 Current liabilities 238,700 156,800 Bonds payable 398,300 398,300 Common stockholders’ equity 989,600 843,500    Total liabilities and stockholders’ equity $1,626,600 $1,398,600

INCOME STATEMENT
FOR THE YEAR ENDED 2017

Sales $1,646,600 Cost of goods sold (807,800 ) Gross profit 838,800 Selling and administrative expenses (444,000 ) Interest expense (39,800 ) Net income $ 355,000
Determine the following for 2017. (Round answers to 2 decimal places, e.g. 1.59 or 45.87%.)
(1) Current ratio at December 31

times (2) Acid-test ratio at December 31

times (3) Accounts receivable turnover

times (4) Inventory turnover

times (5) Return on assets

% (6) Profit margin on sales

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Explanation / Answer

(1) – Current Ratio

Current Ratio = Total Current Assets / Total Current Liabilities

= $772,000 / 238,700

= 3.23 Times

(2) – Acid Test Ratio

Acid Test Ratio = [Total Current Assets – Inventories] / Total Current Liabilities

= [$772,000 – 437,800] / 238,700

= 1.40 Times

(3) - Accounts receivable turnover

Accounts receivable turnover = Sales / Average Accounts receivable

= $1,646,600 / [(199,900 + 79,400)/2]

= $1,646,600 / 139500

= 11.80 Times

(4) - Inventory turnover

Inventory turnover = Cost of goods sold / Average Inventory

= $807,800 / [($437,800 + 356,60) / 2 ]

= $807,800 / 397200

= 2.03 Times

(5) - Return on assets

Return on assets = [net Income / Average Total Assets] x 100

= [$355,000 / 15,12,600] x 100

= 23.47%

(6) - Profit margin on sales

Profit margin on sales = [Net Income / Sales] x 100

= [$355,000 / 16,46,600] x 100

= 21.56%

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