COMPUTER SYSTEMS, INC. Income Statements For the Year Ended December 31 2014 201
ID: 2490661 • Letter: C
Question
COMPUTER SYSTEMS, INC.
Income Statements For the Year Ended December 31
2014 2013
Sales Revenue $3,510,000 $3,036,000
Cost of goods sold 2,480,000 1,950,000
Gross profit 1,030,000 1,086,000
Expenses: Operating expenses 955,000 858,000
Depreciation expense 30,000 27,000
Loss on sale of land - 8,000
Interest expense 18,000 15,000
Income tax expense 8,000 48,000
Total expenses 1,011,000 956,000
Net income $19,000 $130,000
COMPUTER SYSTEMS, INC. Balance Sheets December 31
2014 2013 2012
Assets Current Assets: Cash $201,000 $186,000 $144,000
Accounts receivable 75,000 81,000 60,000
Inventory 125,000 105,000 135,000
Prepaid rent 14,000 12,000 6,000
Long-Term Assets: Investment in bonds 105,000 105,000 - Land 300,000 210,000 240,000 Equipment 300,000 270,000 210,000
Less: Accumulated depreciation (99,000) (69,000) (42,000)
Total Assets $1,021,000 $900,000 $753,000
Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $78,000 $66,000 $81,000
Interest payable 9,000 6,000 3,000
Income tax payable 12,000 15,000 14,000
Long-Term Liabilities: Notes payable 400,000 285,000 225,000
Stockholders' Equity: Common stock 300,000 300,000 300,000
Retained earnings 222,000 228,000 130,000
Total Liabilities and Stockholders' Equity $1,021,000 $900,000 $753,000
1 . Calculate the Current Ratio for 2013 and 2014.
2 . Calculate the Net Sales to Assets ratio for 2013 and 2014.
3 . How are the Current ratio and Net Sales to Assets ratio used?
4 . Based on the ratios calculated, determine if profitablility and solvency improved between 2013 and 2014.
Explanation / Answer
1)2013 current ratio = current assets/current liabilities
=1,86000/66,000
=2.81
2014 current ratio = current assets/current liabilities
=2,01,000/78,000
=2.576 =~2.58
2)2013 assets to sales ratio = total assets/sales revenue
=9,00,000/3,036,000
=0.296 =~0.30
2014 assets to sales ratio = total assets/sales revenue
=1,021,000/3,510,000
=0.290
3)the Current ratio use the liquidity of a company and its ability to pay short-term liabilities The asset to sales ratio can be used to compare how much in assets a company has relative to the amount of revenues the company can generate using their assets.
4) the current ratio is based on the company has financially healthy and capable of paying off its obligations.but compared the 2013-2014 the current ratio is less.2013 year is more than 2014 year.
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