Comparative financial statements for Heritage Antiquing Services for the fiscal

Question

Comparative financial statements for Heritage Antiquing Services for the fiscal year ending December 31 appear on the following page. The company did not issue any new common or preferred stock during the year. A total of 700 thousand shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $1.00. The market value of the company’s common stock at the end of the year was $24. All of the company’s sales are on account.

Working capital. (Enter your answer in thousands of dollars. Omit the "$" sign in your response.)

2.

Current ratio. (Round your answer to 2 decimal places.)

3.

Acid-test ratio. (Round your answer to 2 decimal places.)

4.

Accounts receivable turnover. (Round your answer to 1 decimal place.)

5.

Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

6.

Inventory turnover. (Round your answer to 1 decimal place.)

7.

Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

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Heritage Antiquing Services
Comparative Balance Sheet
(dollars in thousands) This Year Last Year Assets Current assets: Cash $ 1,120 $ 1,270 Accounts receivable, net 9,600 6,800 Inventory 13,900 12,400 Prepaid expenses 740 620 Total current assets 25,360 21,090 Property and equipment: Land 10,800 10,800 Buildings and equipment, net 39,910 40,520 Total property and equipment 50,710 51,320 Total assets $ 76,070 $ 72,410 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 20,500 $ 19,300 Accrued payables 980 860 Notes payable, short term 130 130 Total current liabilities 21,610 20,290 Long-term liabilities: Bonds payable 9,500 9,500 Total liabilities 31,110 29,790 Stockholders' equity: Preferred stock 1,000 1,000 Common stock 700 700 Additional paid-in capital 4,000 4,000 Total paid-in capital 5,700 5,700 Retained earnings 39,260 36,920 Total stockholders' equity 44,960 42,620 Total liabilities and stockholders' equity $ 76,070 $ 72,410

Explanation / Answer

a ) Working Capital = Current Assets - current Liabilities= 23850 - 20650 = $3200b) Current ratio= Current Assets / current Liabilities = 23850/20650 = 1.155c) Acid-test ratio =Current Assets - Inventory / current Liabilities = (23850 - 12900)/20650 =0.53d)Accounts receivable turnover = Net sales/ avg. accounts receivable = 77425/(9000 +7300 )/2 =9.5e)Average collection period = 365 /Accounts receivable turnover = 365/9.5 = 38.42 daysf)Inventory turnover = Sales / Average Inventory = 77425/(1290

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