The financial statements for Castile Products, Inc., are given below: Account ba
ID: 2477585 • Letter: T
Question
The financial statements for Castile Products, Inc., are given below:
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $310,000. All sales were on account. Assets at the beginning of the year totaled $1,020,000, and the stockholders’ equity totaled $705,000.
Required:
Gross margin percentage? (Round your percentage answer to 2 decimal places (i.e., 0.1234 should be entered as 12.34).
Net profit margin percentage? (Round your answer to the nearest whole percentage place (i.e., 0.1234 should be entered as 12%).
Return on total assets? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
Return on equity? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)
Castile Products, Inc.Balance Sheet
December 31 Assets Current assets: Cash $ 19,000 Accounts receivable, net 190,000 Merchandise inventory 350,000 Prepaid expenses 9,000 Total current assets 568,000 Property and equipment, net 910,000 Total assets $ 1,478,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 280,000 Bonds payable, 10% 340,000 Total liabilities 620,000 Stockholders’ equity: Common stock, $5 par value $ 160,000 Retained earnings 698,000 Total stockholders’ equity 858,000 Total liabilities and stockholders' equity $ 1,478,000
Explanation / Answer
GROSS MARGIN %
= GROSS MARGIN / SALES REVENUE
= $1080000 / $2250000
= 0.48 OR 48%
NET PROFIT MARGIN %
= NET INCOME / SALES REVENUE
= $326200 / $ 2250000
= 0.1450 OR 14.5%
RETURN ON TOTAL ASSET
= NET INCOME / AVERAGE TOTAL ASSET**
= $326200 / $1249000
= 0.2612 OR 26.12%
**AVERAGE TOTAL ASSETS = ($1020000 + $1478000) / 2
= $1249000
RETURN ON EQUITY
= NET INCOME / AVERAGE TOTAL EQUITY**
= $326200 / $781500
= 0.4174 OR 41.74%
** AVERAGE TOTAL EQUITY = ($705000 + $858000) / 2
= $781500
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