Rees Corporation experienced a fire on December 31, 2014, in which its financial

Question

Rees Corporation experienced a fire on December 31, 2014, 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, 2014
December 31, 2013 Cash
$ 29,480
$ 19,520 Receivables (net)
78,400
121,400 Inventory
192,200
176,900 Accounts payable
50,230
89,390 Notes payable
32,740
58,610 Common stock, $100 par
415,000
415,000 Retained earnings
135,000
128,000 Rees Corporation experienced a fire on December 31, 2014, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances.

Explanation / Answer

INVENTORY TURNOVER = 2

COST OF GOODS SOLD/AVERAGE INVENTORY = 2

COST OF GOODS SOLD/[(192200+176900)/2] = 2

COST OF GOODS SOLD = 2*184550

COST OF GOODS SOLD = 369100

RECIEVABLES TURNOVER = 7.5

SALES/AVERAGE DEBTORS = 7.5

SALES/[(78400+121400)/2] =7.5

SALES/99900 = 7.5

SALES = 749250

RETURN ON COMMON STOCK HOLDERS EQUITY = 25%

NET INCOME/AVERAGE COMMON STOCK HOLDERS EQUITY = 0.25

NET INCOME/[(415000+128000) + (415000+135000)]/2 =0.25

NET INCOME/546500 = 0.25

NET INCOME = 136625

RETURN ON ASSETS = 20%

136625/AVERAGE ASSETS = 0.2

136625/[(2014'S ASSET +657300)/2] = 0.2

2014'S ASSET +657300 = 1366250

2014'S ASSET (31DEC2014)= 708950

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