M Final Exam C Accounting question I cl x C D ezto mheducation.com/ hm.tpx lhe f

Question

M Final Exam C Accounting question I cl x C D ezto mheducation.com/ hm.tpx lhe financial statements for lhor and Gunnar companies are summarized here: Gunnar Company Company Balance Sheet 25,000 63,200 Cash Accounts Receivable, Net 67,000 18,000 Inventory 134,000 10,000 Equipment, Net 750,000 172,000 58,400 Other Assets 186,000 $1,162,000 $321,600 Total Assets Current Liabilities 148,000 17,000 Note Payable (long-term) (12% interest rate) 246,000 46,000 Common Stock (par $20) 662,000 242,000 Additional Paid-in Capital 60,000 9,000 7,600 Retained Earnings 46,000 Total Liabilities and Stockholders' Equity $1,162,000 $321,600 Income Statement $1,090,000 $306,000 Sales Revenue Cost of Goods Sold 662,000 170,000 Other Expenses 326,000 104,000 102,000 32,000 Net Income Other Data Per share price at end of year 30.00 13.60 Selected Data from Previous Year 17,200 55,800 Accounts Receivable, Net Inventory 123,000 35,600 172,000 Equipment, Net 750,000 Note Payable (long-term) (12% interest rate) 246,000 46,000 Total Stockholders' Equity 258,600 768,000

Explanation / Answer

Ratios are calculated as under:

1. Net profit Margin ratio is the net profit divided by sales

Thor: 102,000/1090000 = 9.36%

Gunnar = 32,000/306,000 = 10.46%

2.

Gross profit percentage is the gross profit divided by sales.

Thor= 428,000/1090000 = 39.27%

Gunnar = 136,000/306,000 = 44.44%

3.

Fixed asset Turnover ratio is the sales divided by the net fixed assets

Thor = 1090000/750,000= 1.45

Gunnar = 306,000/172,000 = 1.78

4.

Return on common stockholder’s equity ratio is the net income left for the equity shareholders’ divided by the average of common stockholders’ equity.

This ratio is computed by dividing the Net income minus Preferred Stock dividends by the average of common stockholders’ equity.

Thor = 102,000/768,000 = 13.28%

Gunnar = 32,000/258,600 = 12.37%

5.

Thor

Earnings per share is $3.08 per share calculated as under:

Particulars

Amount ($)

Net income- Preferred stock dividends (a)

$102,000

Average common stock outstanding (b) as given in question

33,100

Earnings per share (a)/(b)

3.08

Gunnar

Earnings per share is $2.64 per share calculated as under:

Particulars

Amount ($)

Net income- Preferred stock dividends (a)

$32,000

Average common stock outstanding (b) as given in question

12,100

Earnings per share (a)/(b)

2.64

Particulars

Amount ($)

Net income- Preferred stock dividends (a)

$102,000

Average common stock outstanding (b) as given in question

33,100

Earnings per share (a)/(b)

3.08

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