Problem 24-3 Grouper Corporation was formed 5 years ago through a public subscri

Question

Problem 24-3

Grouper Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Grouper and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,890 notes, which are due on June 30, 2018, and September 30, 2018. Another note of $6,030 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Grouper’s cash flow problems are due primarily to the company’s desire to finance a $300,330 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.

GROUPER CORPORATION
BALANCE SHEET
MARCH 31

2018

2017

GROUPER CORPORATION
INCOME STATEMENT
FOR THE FISCAL YEARS ENDED MARCH 31

2018

2017

(a) Compute the following items for Grouper Corporation. (Round answer to 2 decimal places, e.g. 2.25 or 2.25%.)

2017

2018

Percent Changes

Percent Increase

GROUPER CORPORATION
BALANCE SHEET
MARCH 31

Assets

2018

2017

Cash $18,150 $12,620 Notes receivable 148,430 131,870 Accounts receivable (net) 132,710 124,830 Inventories (at cost) 106,010 49,740 Plant & equipment (net of depreciation) 1,462,750 1,424,480     Total assets $1,868,050 $1,743,540 Liabilities and Owners’ Equity Accounts payable $78,420 $90,570 Notes payable 76,070 61,420 Accrued liabilities 10,310 18,690 Common stock (130,000 shares, $10 par) 1,311,520 1,290,790 Retained earningsa 391,730 282,070     Total liabilities and stockholders’ equity $1,868,050 $1,743,540 aCash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018.

Explanation / Answer

1. Current Ratio is given by = Current Assets/Current Liabilities

for 2017 = 319060/170680 = 1.869:1 for 2018 = 405300/164800 = 2.459:1

2. quick ratio is same as current ratio, main difference is e use quick assets hich are nothing but current assets less inventory and prepaids.

for 2017 = 269320/170680 = 1.578:1 for 2018 = 299290/164800 = 1.816:1

3. Inventory Turnover is calculated as Sales/Average Inventory, here Average Inventory is closing+opening/2

average inventory is 106010+49740/2 = 77875

sales for 2018 is 2982440

therefore ratio is 38.3 times

4. Return on Assets = net income/ total assets

for 2017 = 298248/1743540 = 17.1% for 2018 = 349500/1868050 = 18.7%

5. percentage increase is calculated as (change from previous year)/previous year figure

sales = 10.7% (2982440-2693330)/2693330

cogs = 8.4%

gross margin = 13.3%

net income after tax = 17.2%

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.