Heber Springs Motors - Rolls Royce and Ferrari, Inc. Balance Sheet December 31,

Question

Heber Springs Motors - Rolls Royce and Ferrari, Inc. Balance Sheet December 31, 2016 (oo0s) Assets 20,000 Cash Marketable securities Accounts receivable Inventory Long-term receivables Property, plant, and equipment 30,000 50,000 100,000 35,000 65,000 Total assets $300,000 Liabilities and Stockholders' Equity Current liabilities Long-term liabilities Stockholders' equity Total liabilities and stockholders' equity 100,000 60,000 140,000 $ 300,000 Heber Springs Motors-Rolls Royce and Ferrari, Inc. Income Statement For the Year Ended December 31, 2016 (000's) Net sales Cost of goods sold Gross margin Operating expenses Net income from operations Income tax expense Net income $ 400,000 240,000 160,000 40,000 120,000 30,000 $ 90,000

Explanation / Answer

Answer:-

(6)

(i) sold 9,000 shares of its own common stock for cash------Financing Activity

(ii) Paid $1,50,000 dividend------Financing Activity

(iii) Exchange 3000 shres of its common stock for 20 yrs bond------Non Cash Activity

(iv) Paid $1.7 million for federal income tax------Oeprating Activity

(v) Received $2500 in interest income------Operating Activity

(vi) Performed $5000 in professional service for cash------------Non cash Activity

(7)

(i) Receivable Turnover Ratio:-

Receivable Turnover= Credit Sales/ Average Account Receivable

= $4,00,000/ $85,000

= 4.71   

Here assume that Credit Sales equal to Net Sales and Average Accounts receivable qual to Long Term Receivable and Account Receivable

(ii) Current Ratio:-

Current Ratio= Current Assests/ Current Liablities

= Cash+Marketable Securities + Inventory + Accounts Receivable+ Long Term receivable / Current Liablities + Long Term Liabilities

= $20,000+$30,000+$1,00,000+ $ 50,000+ $ 35,000 / $1,00,000+ $60,000

= $2,35,000/ $1,60,000

= 1.47

(iii) Retun on Assets:-

Return on Assets= (Net Income / Average Total Aseets) * 100

= ($90,000 / $3,00,000) * 100

= 0.30 * 100

= 30.0%

(iv) Profit Margin :-

Profit Margin = (Net Income / Net Sales) * 100

= ( $90,000 / $4,00,000) * 100

= 0.225 * 100

= 22.5%

(v) Inventory Turnover :-

Inventory Turnover = Cost of Goods Sold / Average Inventory

= $ 2,40,000 / $ 1,00,000

= 2.40

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