Exercise 12-8 Matthias Medical manufactures hospital beds and other institutiona

Question

Exercise 12-8 Matthias Medical manufactures hospital beds and other institutional furniture. The company’s comparative balance sheet and income statement for 2012 and 2013 follow. Matthias Medical Comparative Balance Sheet As of December 31 2013 2012 Assets Current assets Cash $393,000 $417,400 Accounts receivable, net 1,077,000 776,450 Inventory 735,000 681,050 Other current assets 381,400 247,050 Total current assets 2,586,400 2,121,950 Property, plant, & equipment, net 8,639,160 8,440,060 Total assets $11,225,560 $10,562,010 Liabilities and Stockholders’ Equity Current liabilities $3,165,000 $2,846,050 Long-term debt 3,702,600 3,892,700 Total liabilities 6,867,600 6,738,750 Preferred stock, $5 par value 58,950 58,950 Common stock, $0.25 par value 104,650 103,850 Retained earnings 4,194,360 3,660,460 Total stockholders’ equity 4,357,960 3,823,260 Total liabilities and stockholders’ equity $11,225,560 $10,562,010 Matthias Medical Comparative Income Statement and Statement of Retained Earnings For the Year 2013 2012 Sales revenue (all on account) $10,177,300 $9,613,950 Cost of goods sold 5,612,800 5,298,800 Gross profit 4,564,500 4,315,150 Operating expenses 2,840,200 2,634,150 Net operating income 1,724,300 1,681,000 Interest expense 300,300 308,700 Net income before taxes 1,424,000 1,372,300 Income taxes (30%) 427,200 411,690 Net income $996,800 $960,610 Dividends paid Preferred dividends 29,550 29,550 Common dividends 433,350 413,000 Total dividends paid 462,900 442,550 Net income retained 533,900 518,060 Retained earnings, beginning of year 3,660,460 3,142,400 Retained earnings, end of year $4,194,360 $3,660,460 Calculate the following liquidity ratios for 2013. (If working capital is negative then enter with a negative sign preceding the number or parenthesis, e.g. -15,000 or (15,000). Round all answers except working capital to 2 decimal places, e.g. 2.55.) a. Working capital $ b. Current ratio c. Acid-test ratio d. Accounts receivable turnover times Calculate the following liquidity ratios for 2013. (Round average collection period to 0 decimal place, e.g. 25 and inventory turnover ratio to 2 decimal places, e.g. 5.12. Use 365 days for calculation.) a. Average collection period days b. Inventory turnover times Calculate average days to sell inventory for 2013. (Round answer to 0 decimal places, e.g. 25. Use 365 days for calculation.) Average days to sell inventory days

Explanation / Answer

Working capital        (578600) Current Asset -current liability Total Current Asset-Total Current Liability 2586400-3165000 (578600) Current Ratio                0.82 Current Assets/Current liabilities 2586400/3165000 0.82 Acid Test Ratio               0.58 Acid ratio = (Current Assets – Inventory) / Current liabilities (2586400-735000)/3165000 0.58 Accounts receivable turnover times      10.98 Account Receivable Turnover = Net credit sales/average account receivables Average account receivables = (opening receivables+closing receivables)2 10177300/(776450+1077000)2 10.98   (.98*365) 10 year 357 days Average collection period days Days*Average amount of account receivables/credit sales 1314950/10177300*365 47.16 Total days 47 days Inventory turnover times Inventory Turnover = Cost of Goods Sold / Average Inventory 5612800/1416050 3.96 Average days to sell inventory days (Inventory /cost of sales)*365 735000/5612800*365 48 days

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.