Table 4-1 Garland Company Balance Sheet Assets: Cash and marketable securities $
ID: 2665203 • Letter: T
Question
Table 4-1Garland Company Balance Sheet
Assets:
Cash and marketable securities $500,000
Accounts receivable 800,000
Inventories 1,350,000
Prepaid expenses 50,000
Total current assets $2,700,000
Fixed assets 5,000,000
Less: accum. depr. (2,000,000)
Net fi xed assets $3,000,000
Total assets $5,700,000
Liabilities:
Accounts payable $400,000
Notes payable 900,000
Accrued taxes 75,000
Total current liabilities $1,375,000
Long-term debt 1,200,000
Owner’s equity 3,125,000
Total liabilities and owner’s equity $5,700,000
Net sales (all credit) $8,000,000
Less: Cost of goods sold (3,500,000)
Selling and administrative expense (2,000,000)
Depreciation expense (250,000)
Interest expense (150,000)
Earnings before taxes 2,100,000
Income taxes (700,000)
Net income $1,400,000
Common stock dividends $500,000
Common Shares Outstanding 1,000,000
34) Based on the information in Table 4-1, the debt ratio is:
a. 21.1%
b. 48.8%
c. 45.2%
d. 22.6%
Final Examination
35) Based on the information in Table 4-1, the operating profit margin is:
a. 32.4%
b. 28.1%
c. 17.5%
d. 44.8%
Explanation / Answer
Debt Ratio = Total Debt/Total debt + owners equity
Debt Ratio =( $1,375,000 + $1,200,000)/$5,700,000 = .452 or 45.2%
Operating Profit margin = EBT + Interest /sales
operating profit margin =( $2,100,000 + $150,000 )/$8,000,000 = 28.1%
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