CCC13 The comparative balance sheet of Cookie & Coffee Creations Inc. at October
ID: 2473234 • Letter: C
Question
CCC13 The comparative balance sheet of Cookie & Coffee Creations Inc. at October 31, 2018 for the years 2018 and 2017, and the income statements for the years ended October 31, 2017 and 2018, are presented below.
COOKIE & COFFEE CREATIONS INC.
Balance Sheet
October 31
Assets
2018
2017
Cash
$ 22,324
$ 5,550
Accounts receivable
3,250
2,710
Inventory
7,897
7,450
Prepaid expenses
5,800
6,050
Equipment
102,000
75,500
Accumulated depreciation
(25,200)
(9,100)
Total assets
$116,071
$88,160
Liabilities and Stockholders’ Equity
Accounts payable
$ 1,150
$ 2,450
Income taxes payable
9,251
7,200
Dividends payable
27,000
27,000
Salaries and wages payable
7,250
1,280
Interest payable
188
0
Note payable—current portion
4,000
0
Note payable—long-term portion
6,000
0
Preferred stock, no par, $6 cumulative—
3,000 and 2,800 shares issued,
respectively
15,000
14,000
Common stock, $1 par—25,180
shares issued
25,180
25,180
Additional paid in capital—treasury stock
250
250
Retained earnings
20,802
10,800
Total liabilities and stockholders’ equity
$116,071
$88,160
COOKIE & COFFEE CREATIONS INC.
Income Statement
Year Ended October 31
2018
2017
Sales
$485,625
$462,500
Cost of goods sold
222,694
208,125
Gross profit
262,931
254,375
Operating expenses
Salaries and wages expense
147,979
146,350
Depreciation expense
17,600
9,100
Other operating expenses
48,186
42,925
Total operating expenses
213,765
198,375
Income from operations
49,166
56,000
Other expenses
Interest expense
413
0
Loss on disposal of plant assets
2,500
0
Total other expenses
2,913
0
Income before income tax
46,253
56,000
Income tax expense
9,251
14,000
Net income
$ 37,002
$ 42,000
Instructions
(a) Calculate the following ratios for 2017 and 2018.
1. Current ratio
2. Debt to total assets
3. Gross profit rate
4. Profit margin
5. Return on assets (Total assets at November 1, 2016, were $33,180.)
6. Return on common stockholders’ equity (Total common stockholders’ equity at November 1, 2016, was $23,180. Dividends on preferred stock were $16,800 in 2017 and $18,000 in 2018).
Assets
2018
2017
Cash
$ 22,324
$ 5,550
Accounts receivable
3,250
2,710
Inventory
7,897
7,450
Prepaid expenses
5,800
6,050
Equipment
102,000
75,500
Accumulated depreciation
(25,200)
(9,100)
Total assets
$116,071
$88,160
Liabilities and Stockholders’ Equity
Accounts payable
$ 1,150
$ 2,450
Income taxes payable
9,251
7,200
Dividends payable
27,000
27,000
Salaries and wages payable
7,250
1,280
Interest payable
188
0
Note payable—current portion
4,000
0
Note payable—long-term portion
6,000
0
Preferred stock, no par, $6 cumulative—
3,000 and 2,800 shares issued,
respectively
15,000
14,000
Common stock, $1 par—25,180
shares issued
25,180
25,180
Additional paid in capital—treasury stock
250
250
Retained earnings
20,802
10,800
Total liabilities and stockholders’ equity
$116,071
$88,160
Explanation / Answer
2018 2017 Current ratio = current assets/ current liabilities 0.80 0.57 Debt to total assets = total liabiliites /total assets 0.47 0.43 Gross profit rate = gross profit/ sales 54.14% 55.00% profit margin= net income / sales 7.62% 9.08% Return on total assets = net income / average total assets 0.36 0.69 Return on common stockholders equity = net income - preferred dividend / average common stockholders equity 0.75 1.04
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