BEULAH COMPANY Income Statement For the Years Ended December 31 2013 2012 Net sa

Question

BEULAH COMPANY Income Statement For the Years Ended December 31 2013 2012 Net sales (all on account) $600,000 $520,000 Expenses Cost of goods sold 415,000 354,000 Selling and administrative 120,000 114,800 Interest expense 7,800 6,000 Income tax expense 18,000 14,000 Total expenses 561, 600 488,800 Net income $ 38,400 $31,200 BEULAH COMPANY Balance Sheets December 31 Assets 2013 2012 Current assets Cash $21,000 $18,000 Short-term investments 18,000 15,000 Accounts receivable (net) 86,000 74,000 Inventory 90,000 70,000 Total current assets 215,000 177,000 Plant assets (net) 423,000 383,000 Total assets $638,000 $560,000 Liabilities and Stockholders

Explanation / Answer

(a) Current Current assets/current liabilities = 215,000/145,000 = 1.48:1 (b) Acid-test (Current assets - inventory)/current liabilities = 125,000/145,000 = 0.86:1 (c) Receivables turnover = 7.5 times; correct (d) Inventory turnover = 5.19 times; correct (e) Profit margin Net income/Net sales = 38,400/600,000 = 6.4% (f) Asset turnover Net sales/Ave. total assets = 600,000/599,000 = 1.00 times (g) Return on assets Net income/Ave. total assets = 38,400/599,000 = 6.41%

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