Required information The following information applies to the questions displaye

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Required information The following information applies to the questions displayed below. Summary information from the financial statements of two companies competing in the same industry follows Barco Kyan Barco Kyan Company Company Company Company Data from the current year-end balance sheets Assets Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Plant assets, net Total assets Data from the current year's income statement Sales $790,000 $880,200 590,100 648,500 11,000 15,18524,300 175,815 196,400 35 4.01 22,000 $ 31,000 Cost of goods sold 8,900 33,400 60,400 Interest expense 10,000 84,440 138,500 Net income 8,600 Income tax expense 6,200 7,850Basic earnings per share 320,000 310,400 Cash dividends per share 5.49 3.73 $476,040 $556,750 Beginning-of-year balance sheet data Accounts receivable, net Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Total liabilities and equity $ 25,800 $ 52,200 65,340 $103,300 Current notes receivable (trade) 79,800107,000 Merchandise inventory 160,000 226,000 Total assets 170,900 120,450 Common stock, $5 par value 65,600 115,400 448,000 402,500 160,000 226,000 114,445 105,302 $476,040 $556,750 Retained earnings

Explanation / Answer

Answer 1-b.

Acid-Test Ratio = (Cash + Short-term Investments + Current Receivable) / Current Liabilities

Current Receivable = Accounts Receivable, net + Current Notes Receivable

Barco:

Acid-Test Ratio = ($22,000 + $0 + $43,400) / $65,340
Acid-Test Ratio = 1.0 to 1

Kyan:

Acid-Test Ratio = ($31,000 + $0 + $69,000) / $103,300
Acid-Test Ratio = 1.0 to 1

Answer 1-c.

Accounts Receivable Turnover = Net Sales / Average Accounts Receivable, net

Barco:

Average Accounts Receivable, net = ($33,400 + $10,000 + $25,800 + $0) / 2
Average Accounts Receivable, net = $34,600

Accounts Receivable Turnover = $790,000 / $34,600
Accounts Receivable Turnover = 22.8 times

Kyan:

Average Accounts Receivable, net = ($60,400 + $8,600 + $52,200 + $0) / 2
Average Accounts Receivable, net = $60,600

Accounts Receivable Turnover = $880,200 / $60,600
Accounts Receivable Turnover = 14.5 times

Answer 1-f.

Days’ Sales Uncollected = Current Receivables, net / Net Sales * 365

Barco:

Days’ Sales Uncollected = $34,600 / $790,000 * 365
Days’ Sales Uncollected = 16.0 days

Kyan:

Days’ Sales Uncollected = $60,600 / $880,200 * 365
Days’ Sales Uncollected = 25.1 days

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