Hi, I really need help on this review question so I can study for my exam in a w

Question

Hi, I really need help on this review question so I can study for my exam in a week. It's a multi part question and I need all the answers to be shown with work so I know how to get it.

-Current Ratio

-Return on common stockholders' equity

-Price-earnings ratio

-Acid-test ratio

-Receivables turnover

1. (Chapter 14) Presented below is the financial date for Gaines Company: GAINES COMPANY Comparative Balance Sheet December 31 Assets Cash Short-term investments Accounts receivable (net) Inventory Property, plant and equipment (net) 25,000 15,000 50,000 50,000 $ 40,000 60,000 30,000 70,000 Total assets Accounts payable Short-term notes payable Bonds payable Common stock Retained earnings 20,000 30,000 90,000 150,000 30,000 90,000 160,000 150,000 Total liabilities and stockholders' equity $400,000 Income Statement For the Year Ended December 31, 20X3 Net sales Cost of goods sold Gross profit Expenses $400,000 240.000 160,000 Operating expenses Interest expense $42,000 18,000 60,000 100,000 Total expenses Income before income taxes Income tax expense Net income dditional informatio a. Cash dividends of $30,000 were declared and paid in 20X3 b. Weighted-average number of shares of common stock outstanding during 20X3 was 30,000 shares. c. Market value of common stock on December 31, 20X3, was $21 per share Instructions Compute the following ratios for Gaines Company for 20X3: Current ratio Return on common stockholders' equity . Price-earnings ratio Acid-test ratio Receivables turnover

Explanation / Answer

1) Current ratio = Current assets/Current liabilities

= (25000+15000+50000+50000)/(20000+30000)

Current ratio = 2.8:1

2) Return on common Stockholder's equity = Net income*100/average stockholder's equity

= 70000*100/240000

Return on Common Stockholder's equity = 29.17%

3) Price earning ratio = MPS/EPS

EPS = 70000/30000 = 2.33

Price earning ratio = 21/2.33 = 9:1

4) Acid test ratio = (25000+15000+50000)/50000 = 1.8:1

5) Receivable turnover = 400000/40000 = 10 Times

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