Panza Corporation experienced a fire on December 31, 2020, in which its financia
ID: 2333377 • Letter: P
Question
Panza Corporation experienced a fire on December 31, 2020, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances.
December 31, 2020
December 31, 2019
Additional information:
Compute the following for Panza Corporation.
December 31, 2020
December 31, 2019
Cash $ 30,000 $ 16,000 Accounts receivable (net) 74,500 130,000 Inventory 195,000 176,000 Accounts payable 45,000 91,000 Notes payable 28,000 61,000 Common stock, $100 par 401,000 401,000 Retained earnings 120,000 106,500Explanation / Answer
(a) Inventory turnover ratio=Cost of goods sold/Average inventory Cost of goods sold=Inventory turnover ratio*Average inventory Average inventory=(195000+176000)/2=185500 Cost of goods sold=3*185500=$ 556500 (b) Accounts receivable turnover ratio=Net credit sales/Average accounts receivable Net credit sales=Accounts receivable turnover ratio*Average accounts receivable Average accounts receivable=(74500+130000)/2=$ 102250 Net credit sales=7.7*102250=$ 787325 © return on common stockholders’ equity=Net income/Average Stockholder's equity Net income= return on common stockholders’ equity*Average Stockholder's equity Average stockholder's equity: 2020 2019 Common stock 401000 401000 Retained earnings 120000 106500 Stockholder's equity 521000 507500 Average stockholder's equity=(521000+507500)/2=$ 514250 Net income= 0.30*514250=$ 154275 (d) Return on assets=Net income/Avergae total assets Average total assets=Net income/Return on assets=154275/12.5%=$ 1234200 Total assets at Dec 31,2019=$ 598000 Average total assets=(598000+x)/2 1234200*2=598000+x x=Total assets at Dec 31,2020=$ 1870400
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