The comparative financial statements of Marshall Inc. are as follows. The market
ID: 2580954 • Letter: T
Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.80 on December 31, 20Y2.
Question not attempted.
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Retained earnings, January 1
$3,712,000.00
$3,262,000.00
3
Net income
591,000.00
560,000.00
4
Total
$4,303,000.00
$3,822,000.00
5
Dividends:
6
On preferred stock
$10,000.00
$10,000.00
7
On common stock
100,000.00
100,000.00
8
Total dividends
$110,000.00
$110,000.00
9
Retained earnings, December 31
$4,193,000.00
$3,712,000.00
Question not attempted.
Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Sales
$10,840,000.00
$10,000,000.00
3
Cost of goods sold
6,000,000.00
5,440,000.00
4
Gross profit
$4,840,000.00
$4,560,000.00
5
Selling expenses
$2,160,000.00
$2,000,000.00
6
Administrative expenses
1,627,500.00
1,500,000.00
7
Total operating expenses
$3,787,500.00
$3,500,000.00
8
Income from operations
$1,052,500.00
$1,060,000.00
9
Other income
99,500.00
20,000.00
10
$1,152,000.00
$1,080,000.00
11
Other expense (interest)
131,000.00
120,000.00
12
Income before income tax
$1,021,000.00
$960,000.00
13
Income tax expense
430,000.00
400,000.00
14
Net income
$591,000.00
$560,000.00
Question not attempted.
Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Assets
3
Current assets:
4
Cash
$1,050,000.00
$950,000.00
5
Marketable securities
301,000.00
420,000.00
6
Accounts receivable (net)
584,000.00
500,000.00
7
Inventories
410,000.00
380,000.00
8
Prepaid expenses
107,000.00
20,000.00
9
Total current assets
$2,452,000.00
$2,270,000.00
10
Long-term investments
800,000.00
800,000.00
11
Property, plant, and equipment (net)
5,750,000.00
5,184,000.00
12
Total assets
$9,002,000.00
$8,254,000.00
13
Liabilities
14
Current liabilities
$859,000.00
$792,000.00
15
Long-term liabilities:
16
Mortgage note payable, 6%,
$200,000.00
$0.00
17
Bonds payable, 4%,
3,000,000.00
3,000,000.00
18
Total long-term liabilities
$3,200,000.00
$3,000,000.00
19
Total liabilities
$4,059,000.00
$3,792,000.00
20
Stockholders’ Equity
21
Preferred 4% stock, $5 par
$250,000.00
$250,000.00
22
Common stock, $5 par
500,000.00
500,000.00
23
Retained earnings
4,193,000.00
3,712,000.00
24
Total stockholders’ equity
$4,943,000.00
$4,462,000.00
25
Total liabilities and stockholders’ equity
$9,002,000.00
$8,254,000.00
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.
1. Working Capital____
2. Current Ratio_____
3. Quick Ratio______
4. Accounts receivable turnover_____
5. Number of days' sales in receivalbes-_____
6. Inventory turnover_________
7. Number of days' sales in Inventory_________
8. Ratio of fixed assets to long-term liabilities_____
9. Ratio of liabilities to stockholders' equity_____
10> Time interest earned________
11. Asset turnover________
12. Return on total assets___________
13. Return on stockholders' equity_____
14. Return on common stockholders' equity_______
15. Earnings per share on common stock__________
16. Price-earnings ratio______
17. Dividends per share of common stock________
18. Dividend Yield___________
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
Explanation / Answer
Solution:
1) Working Capital for 20Y2
Working capital is the amount of cash available to company for day to day working. In other words, working capital is the difference between current asset and current liabilities
Working Capital = Total Current Assets – Total Current Liabilities
= 2,452,000 - 859,000
= 1,593,000
2) Current Ratio for 20Y2 = Total Current Assets / Total Current Liabilities
= 2,452,000 / 859,000
= 2.8545
3)
Quick Ratio = Quick Assets / Current Liabilities
Quick Assets are the current assets which are immediately convertable in cash. Inventories and Prepaid Expenses are not considered as quick assets.
Quick Assets = Total Current Assets 2,452,000 – Inventories 410,000 – Prepaid Expenses 107,000 = 1,935,000
Quick Ratio = 1,935,000 / 859,000 = 2.2526
4) Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable
= 10,840,000 / 542,000
= 20
Average Accounts Receivable = (584,000 + 500,000)/2 = $542,000
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