No 11 is 29.2% and No 12 is (d) I don\'t know how they are getting the answers.
ID: 2567651 • Letter: N
Question
No 11 is 29.2% and No 12 is (d)
I don't know how they are getting the answers.
You have the tollowing intormation available trom your company's most recent Income Statement and Balance Sheet: EBIT Interest Taxes Net Income 53,141.00 $80.00 $1,040.74 $2,020.26 Current Assets Total Assets Long-Term Debt Capital Shares Retained Earnings (beginning of period) Retained Earnings (end of period) $1,950.00 $7,500.00 $1,000.00 $2,890.00 $900.000 $2,420.26 10. The interest rate on the long-term debt is a) 0.4%. b) 0.8%. c) 4.0%. d) 5.0%. e) 8.0%. 11. The Debt Ratio is a) b) c) 6.7%. 13.3%. 29.2%. Page 3 of9 ENGM 401 & 620 X1 Sample Midterm Exam #2 d) 43.5%. e) 70.8%. 12. Which statement is not true? a) The working capital ratio is 1.64 b) The current portion of the long-term debt cannot be calculated from the given nformation. c) The company has positive working capital. d) The company added less to retained earnings in this period than it paid in dividends.Explanation / Answer
Answer 10. The interest rate on the long-term debt is: e) 8.0 % Interst rate is = Interest Paid / Long-term Debt = (80 / 1,000) * 100 = 8.0 11. The debt Ratio is: c) 29.2% The Debt Ratio = Total Liabilities / Total Assets = (Total Liabilities / 7500) *100 = 29.2 % Asset = Capital + Liabilities Total Asset = (Capital Shares + Retained Earnings) + Long Term Liabilities + Current Liabilities $7,500 = ($2,890 + $2,420.26) + $1,000 + Current Liabilities Current Liabilities = $7,500 - ($2,890 + $2,420.26 + $1,000) = $7,500 - $6,310.26 = $1,189.74 Total Liabilities = $1,189.74 + $1,000 = $2,189.74 The Debt Ratio = Total Liabilities / Total Assets The Debt Ratio = $2,189.74 / $7,500 = 29.2% 12. Which statement is not true? d) The Company added less to retained earnings in this period than it paid in dividents Retained Earnings added this year = Retained Earnings end of period - Retained Earnings Beginning of period Retained Earnings added this year = $2,420.26 - $900 = $1520.26 Divident Paid = Net Income - Retained Earnings added this year Divident Paid = $2,020.26 - 1520.26 = $500 So, Divident paid is less while comparing with Retained Earnings added this year
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