Stargel, Inc. Comparative Retained Earnings Statement For the Years Ended Decemb

Question

Stargel, Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 2017 and 2016 2017 2016 Retained earnings, January 1 5,375,000 4,545,000 Add: net income 900,000 925,000 Total 6,275,000 5,470,000 Deduct dividends: On preferred stock 45,000 45,000 On common stock 50,000 50,000 Total 95,000 95,000 Retained earnings, December 31 6,180,000 5,375,000 Stargel, Inc. Comparative Income Statement For the Years Ended December 31, 2017 and 2016 2017 2016 Sales (all on account) 10,050,000 9,450,000 Sales returns and allowances 50,000 50,000 Net sales 10,000,000 9,400,000 Cost of goods sold 5,350,000 4,950,000 Gross profit 4,650,000 4,450,000 Selling expenses 2,000,000 1,880,000 Administrative expenses 1,500,000 1,410,000 Total operating expenses 3,500,000 3,290,000 Income from operations 1,150,000 1,160,000 Other income 150,000 140,000 1,300,000 1,300,000 Other expense (interest) 170,000 150,000 Income before income tax 1,130,000 1,150,000 Income tax expense 230,000 225,000 Net income 900,000 925,000 Stargel, Inc. Comparative Balance Sheet December 31, 2017 and 2016 Dec. 31, 2017 Dec. 31, 2016 Assets Current assets: Cash 500,000 400,000 Marketable securities 1,010,000 1,000,000 Accounts receivable, net 740,000 510,000 Inventories 1,190,000 950,000 Prepaid expenses 250,000 229,000 Total current assets 3,690,000 3,089,000 Long-term investments 2,350,000 2,300,000 Property, plant, and equipment, net 3,740,000 3,366,000 Total assets 9,780,000 8,755,000 Liabilities Current liabilities 900,000 880,000 Long-term liabilities Note payable, 8%, due 2020 200,000 - Bonds payable, 10%, due 2025 1,500,000 1,500,000 Total long-term liabilities 1,700,000 1,500,000 Total liabilities 2,600,000 2,380,000 Stockholders' Equity Preferred $.90 stock, $10 par 500,000 500,000 Common stock, $5 par 500,000 500,000 Retained earnings 6,180,000 5,375,000 Total stockholders' equtiy 7,180,000 6,375,000 Total liabilities and stockholders' equity 9,780,000 8,755,000 Calculate the following ratios for both years: current ratio, average days to sell inventory (use ending inventory), debt to assets ratio, return on investment (use total assets), gross margin percentage, asset turnover (use ending asset balance), return on sales, and plant assets to long-term debt ratio. Include all formulas and intermediate calculations.

Explanation / Answer

2017:

Current ratio = Total current assets / Current liabilities

                        = $3,690,000 / $900,000

                        = 4.1: 1

2016:

Current ratio = Total current assets / Current liabilities

                        = $3,089,000 / $880,000

                        = 3.51: 1

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