he comparative statements of Painter Tool Company are presented below. PAINTER T
ID: 2489072 • Letter: H
Question
he comparative statements of Painter Tool Company are presented below.
PAINTER TOOL COMPANY
Income Statement
For the Years Ended December 31
2017
2016
PAINTER TOOL COMPANY
Balance Sheets
December 31
Assets
2017
2016
Liabilities and Stockholders’ Equity
All sales were on account.
Compute the following ratios for 2017. (Weighted-average common shares in 2017 were 57,000.) (Round Earnings per share, Current ratio and Acid-test ratio to 2 decimal places, e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
PAINTER TOOL COMPANY
Income Statement
For the Years Ended December 31
2017
2016
Net sales $1,818,500 $1,750,500 Cost of goods sold 1,011,500 996,000 Gross profit 807,000 754,500 Selling and administrative expenses 499,000 479,000 Income from operations 308,000 275,500 Other expenses and losses Interest expense 18,000 14,000 Income before income taxes 290,000 261,500 Income tax expense 87,000 77,000 Net income $ 203,000 $ 184,500Explanation / Answer
Solution.
Calculation of ratio :
(a)Earnings per share = Net income /* Number of shares
= 203,000 / 56,000
= $3.62
*Number shares = common stock /Face value
= 280,000 / 5
= 56,000
(b) Return on common stock equity = Net income / *Average common stockX100
= 203,000 / 290,000 X100
= 70%
*Average common stock = (280,000+300,000) / 2
= 580,000 / 2
= 290,000
(c) Return on assets = Net Income / Total Assets X100
= 203,000 / 970,200 X100
= 20.92%
(d)Current ratio = current assets / current liabilities
= 369,900 / 203,500
= 1.81: 1
(e)Acid test ratio = Liquid Assets / Current Assets
= (Current Assets – Inventory) / Current liabilities
= (369,900 – 133,000) / 203,500
= 236,900 / 203,500
= 1.16: 1
(f) Accounts receivable turnover = Credit sales / *Average accounts receivable
= 1,818,500 / 105,300
= 17.26 Times
*Average accounts receivable = (107,800 + 102,800) / 2
= 105,300
(g) Inventory turnover ratio = Cost of goods sold / *Average inventory
= 1,011,500 / 124,250
= 8.14 Times
*Average inventory = (133,000 + 115,500) / 2
= 124,250
(h) Time interest earned = Operating profit / Interest expense
= 308,000 /18,000
= 17.11 Times
(i)Assets Turnover ratio = Sales / Total Assets
= 1,818,500 / 970,200
= 1.87 Times
(j) Debt to Assets ratio = Total debt / Total assets
= 403,500 / 970,200
= 0.41 Times
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