Exercise 92 The following data is given: December 31, 2015 2014 Cash $65,500 $52

Question

Exercise 92 The following data is given: December 31, 2015 2014 Cash $65,500 $52,000 Accounts receivable (net) 89,500 58,000 Inventories 89,500 115,000 Plant assets (net) 383,000 324,000 Accounts payable 55,000 41,000 Salaries and wages payable 10,500 5,500 Bonds payable 69,000 68,000 8% Preferred stock, $40 par 100,000 100,000 Common stock, $10 par 120,000 90,000 Paid-in capital in excess of par 80,000 65,000 Retained earnings 193,000 179,500 Net credit sales 980,000 Cost of goods sold 710,000 Net income 81,000 Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.) (a) Acid-test ratio at 12/31/15 : 1 (b) Accounts receivable turnover in 2015 times (c) Inventory turnover in 2015 times (d) Profit margin on sales in 2015 % (e) Return on common stock equity in 2015 % (f) Book value per share of common stock at 12/31/15 $

Explanation / Answer

a. acid test ratio = (Current assets - inventories ) / Current liabilities

= ($244500 - $89500) / $65500

= 2.37 times.

b. Accounts receivables turnover = Credit sales / Average accounts receivable

= $980000 / ($89500 + $58000)/2

= $980000 / $73750

= 13.29 times.

c. Inventory turnover = Cost of goods sold / average inventory

= $710000 / ($89500 + $115000)/2

= $710000 / $102250

= 6.94 times.

d. profit margin = Net profit / net sales

= $81000 / $980000

= 8.27%.

e. Return on common stock equity = net income / average common stockholder's equity

= $81000 / ($120000 + $90000)/2

= $81000 / $105000

= 77.14%

f. Book value per share of common stock = $120000 / 12000 shares

= $10.

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