Managerial Accounting- Final 2017-Take Home Problems (All Selected year-end fina
ID: 2592427 • Letter: M
Question
Managerial Accounting- Final 2017-Take Home Problems (All Selected year-end financial statements of ADAMS Corporation follow. sa les were on credit; selected balance sheet amounts at December 31, 2016, were inventory, $55,900; total assets, $249,400; common stock, $83,000; and retained earnings, $43,211.) Income Statement For Yeer Ended December 31, 2017 454,600 297,750 Sales Cost of goods sold Gross profit 156,850 98,700 5,000 Interest expense Income before taxes 53,150 Income taxes 21,411 Net income 31,739 ADAMS CORPORATION Balance Sheet December 31, 2017 Liabilities and Equity Assets Cash Short-term 10,000 Accounts 17,500 4,000 3,900 payable 8,400 wages payable receivable, net 30,600 Income taxes payable Long-term note payable, Notes receivable (trade)* 6,500 secured 38,150 mortgage on 2.800 Common Merchandise by 64,400 83,000 74,950 plant assets Prepaid Plant assets, net 151,300 Retained Total Total assets 247,750 liabilities and 247,750 These are short-term notes receivable arising from customer (trade) sales.Explanation / Answer
Answer: Allowed to answer the first 4 parts in case of multiple subparts but have answered all
Acid test ratio: (Cash + Short term investments + Accounts receivable + Notes receivable) / Current liabilities
Current liabilities : Accounts payable + Accrued wages payable + Income taxes payable
CL = 17500 + 4000 + 3900
Acid test ratio : (10000 + 8400 + 30600 + 6500)/ 25400 = 2.185
days sales uncollected : accounts receivable / net sales = 30600/454600 * 365 = 24.56
inventory turnover : cost of goods sold / average inventory
avg. inventory = (55900 + 38150) / 2 = 47025
inventory turnover = 297750 / 47025 = 6.33
days sales in inventory = 365 / inventory turnover = 365 / 6.33 = 57.64
Debt to equity ratio : total debt / total equity = 89800/ 157950 = 0.5685
Times interest earned : net income before taxes and interest / interest expense
times interest earned : EBIT / interest
EBIT : gross profit - operating expense = 156850 - 98700 = 58150
Times interest earned : 58150 / 5000 = 11.63
profit margin ratio : gross profit / revenue = 156850/454600 = 0.3450 or 34.50%
total asset turnover: net sales / avg. total assets = 454600 / 248575 = 1.828
Average assets : (249400 + 247750 ) / 2 = 248575
Return on total assets : net income / avg . assets
ROA = 31739/248575 = 0.1276 or 12.76%
Return on shareholders equity : net income / Avg. shareholders equity
Avg. shareholders equity = (126211 + 157950)/2 = 142080.5
ROE = 31739 / 142080.5 = 0.2233 or 22.33%
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