The following financial statements and additional information are available Texa
ID: 2480933 • Letter: T
Question
The following financial statements and additional information are available
Texas Ltd
Comparative Balance Sheet
December 31, 2014 and 2015
2015
2014
Assets
Cash
175,000
88,000
Account Receivable
130,000
102,000
Inventory
127,600
173,000
Prepaid Expenses
8800
10,800
Total current assets
441,400
373,800
Plant and Equipment
248,000
130,000
Acc. Depreciation- Plant & Equip
(54,000)
(18,000)
Total Assets
635,400
585,800
Liabilities and Equity
Accounts payable
50,000
60,000
Wages payable
12,000
30,000
Income tax payable
6,800
7,600
Total current liabilities
68,800
97,600
Notes payable (Long term)
60,000
120,000
Total liabilities
128,800
217,600
Equity
Common stock, $2 par value
440,000
320,000
Retained earnings
66,600
48,200
Total liabilities and equity
635,700
585,800
Texas Ltd
Income Statement
For year ended December 31, 2015
Sales
$1,356,000
Cost of goods sold
822,000
Gross profit
534,000
Operating expenses
Depreciation expense
117,200
Other expense
134,000
Total operating expenses
251,200
282,800
Other gains (losses)
Gain on sale of car
4,000
income before taxes
286,800
Income tax expense
87,780
Net Income
199,020
Calculate:
Working Capital g. Equity Ratio
Current Ratio h. Profit Margin
Quick Ratio i. Gross Margin
Account Receivable Ratio j. Return on Total Assets
Inventory turnover k. Return on Common Stockholders equity.
Days of sale inventory
Texas Ltd
Comparative Balance Sheet
December 31, 2014 and 2015
2015
2014
Assets
Cash
175,000
88,000
Account Receivable
130,000
102,000
Inventory
127,600
173,000
Prepaid Expenses
8800
10,800
Total current assets
441,400
373,800
Plant and Equipment
248,000
130,000
Acc. Depreciation- Plant & Equip
(54,000)
(18,000)
Total Assets
635,400
585,800
Liabilities and Equity
Accounts payable
50,000
60,000
Wages payable
12,000
30,000
Income tax payable
6,800
7,600
Total current liabilities
68,800
97,600
Notes payable (Long term)
60,000
120,000
Total liabilities
128,800
217,600
Equity
Common stock, $2 par value
440,000
320,000
Retained earnings
66,600
48,200
Total liabilities and equity
635,700
585,800
Explanation / Answer
a) Working Capital : Current Assets - Current Liabilities = $4,41,400 - $68,800=$3,72,600
b) Current Ratio = Current Assets/current Liabilities = $4,41,400 / $68,800=6.42
c) Quick Ratio = Cash+Cash Equivalents+Short-term investments+Current Receivables/Current liabilities = $88,000 + $1,02,000 / $68,800 = 2.76
d) Accounts Receivable Ratio = Net Credit Sales / Average Accounts Recivables = Net Credit Sales = $13,56,000 ; Average Accounts Receivable = $1,30,000+$1,02,000/2 = $1,16,000.
Hence = $13,56,000 / $1,16,000 = 11.67
e) Inventory Turnover = Cost of goods sold/average inventory = Cost of goods sold = $8,22,000 ; Average Inventory = 1,27,600+1,73,000/2=1,50,300.
Hence = $8,22,000 / $1,50,300 = 5.47
f) Days of Sale Inventory = Accounts Receivables/Net Credit Sales * 365 = 1,30,000/13,56,000*365 = 35 days
g) Equity Ratio = Total Equity / Total Assets = $5,06,600/$6,35,400 = 0.80
h) Profit Margin = Net Income / Net Sales = 1,99,020/13,56,000 = 0.15
i) Gross Margin = Gross Profit / Net Sales = 5,34,000/13,56,000 = 0.39
j) Return on Total Assets = Net Income/Average total assets = Net Income = 1,99,020 ; Average total assets = 6,35,400+5,85,800/2 = 6,10,600. Hence 1,99,020/6,10,600 = 0.33
k) Return on Common Stockholders Equity = Net Income - Preferred Dividends / Share Holders Equity = 1,99,020/4,40,000= 0.45
Note : The value of Total liabilities and equity should be 635,400 but not 635,700 in the above balance sheet given in question.
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