Using the nancial statement information from below, create balance sheets and (t
ID: 2577699 • Letter: U
Question
Using the nancial statement information from below, create balance sheets and (traditional gross-margin format) income statements for the given years. • From those nancial statements determine the following for the most current year:
1) Working Capital
2) Current Ratio
3) Quick Ratio
4) Inventory Turnover
5) Average Sales Period
6) Total Asset Turnover
7) Times Interest Earned Ratio
8) Debt-to-Equity Ratio
9) Gross Margin percentage
10) Cost of Goods Sold percentage 1
11) Net Prot Margin percentage
12) Return on Total Assets
13) Return on Equity
14) Earnings per Share
15) Book Value per Share
Year ended Dec. 31, 2016
Cost of Goods Sold 400,000
Cash 35,000
Selling & Administrative Expenses 160,000
Salaries Payable 40,000
Long-term liabilities 270,000
Finished Goods Inventory 55,000
Accounts Payable 20,000
Interest Expense 8,000
Income Tax Expense 30%
Sales Revenue (all on account) 700,000
Plant, Property, and Equipment, net 300,000
Accounts Receivable 60,000
Common Stock ($1 par) 120,000
Year ended Dec. 31, 2015
Cash 30,000
Accounts Receivable 50,000
Finished Goods Inventory 60,000
Plant, Property, and Equipment, net 320,000
Accounts Payable 20,000
Salaries Payable 20,000
Long-term liabilities 300,000
Common Stock ($1 par) 120,000
Explanation / Answer
Solution:
1) Working Capital for 2016
Working capital is the amount of cash available to company for day to day working. In other words, working capital is the difference between current asset and current liabilities
Working Capital = Current Assets – Current Liabilities
Current Assets = Cash 35,000 + Accounts Receivable 60,000 + Finished Goods Inventory 55,000 = $150,000
Current Liabilities = Accounts Payable 20,000 + Salaries Payable 40,000 = $60,000
Working Capital = 150,000 – 60,000 = 90,000
2) Current Ratio for 2016 = Current Assets / Current Liabilities
= 150,000 / 60,000
= 2.5
3) Quick Ratio = Quick Assets / Current Liabilities
Quick Assets = Current Assets 150,000 – Finished Goods Inventory 55,000 = 95,000
Quick Ratio = 95,000 / 60,000 = 1.58
4) Inventory Turnover = Cost of Goods Sold / Average Stock
= $400,000 / (55,000 + 60,000)/2
= 400,000 / 57,500
= 6.96
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