The balance sheets for Plasma Screens Corporation and additional information are
ID: 2533072 • Letter: T
Question
The balance sheets for Plasma Screens Corporation and additional information are provided below.
Additional information for 2018:
1. Net income is $130,400.
2. Sales on account are $1,248,300.
3. Cost of goods sold is $993,750.
Required:
1. Calculate the following risk ratios for 2018: (Round your answers to 1 decimal place.)
PLASMA SCREENS CORPORATION
Balance Sheets
December 31, 2018 and 2017 2018 2017 Assets Current assets: Cash $ 198,000 $ 112,000 Accounts receivable 62,000 84,000 Inventory 87,000 72,000 Investments 3,200 1,200 Long-term assets: Land 400,000 400,000 Equipment 710,000 590,000 Less: Accumulated depreciation (348,000) (188,000) Total assets $ 1,112,200 $ 1,071,200 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 91,000 $ 77,000 Interest payable 5,000 11,200 Income tax payable 7,000 4,200 Long-term liabilities: Notes payable 100,000 200,000 Stockholders' equity: Common stock 620,000 620,000 Retained earnings 289,200 158,800 Total liabilities and stockholders' equity $ 1,112,200 $ 1,071,200
Explanation / Answer
A) RECIEVABLES T/O RATIO :-
= Credit sales / Average recievables
=1,248,300/{(84,000+62,000) /2}
=17.1 times
B) INVENTORY T/O RATIO :-
= COGS / Average Inventory
= 993,750/{(72,000+80,000)/2}
=12.5 times
C) CURRENT RATIO:-
= Current Assets / Current Liabilities
=350,200 / 103,000
=3.4 times
D) ACID TEST RATIO :-
=Current Assets - Inventory/Current Liabilities
=350,200 - 87,000 / 103,000
=263,200/103,000
=2.55 times
E) DEBT-EQUITY RATIO :-
= Debt / Equity
=100,000 /(620,000+289,200)
=100,000/909200
=0.109
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