Complete the balance sheet and sales information in the table that follows for H

Question

Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data:

Debt ratio: 60%
Quick ratio: 1.25
Total assets turnover: 2.8
Days sales outstanding: 36 days*
Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 23%
Inventory turnover ratio: 7.0

* Calculation is based on a 365-day year.

Round your answers to the nearest whole dollar.

Balance Sheet

Cash $   Accounts payable $   Accounts receivable $   Long-term debt $  60,000 Inventories $   Common stock $   Fixed assets $   Retained earnings $  97,500 Total assets $  300,000 Total liabilities and equity $   Sales $   Cost of goods sold $  

Explanation / Answer

1)   TA = TL & E = $300,000
2)   TA turnover ratio =2.8 X
? Sales/TA = 2.8 X.
? Sales = TA times 2.8
? Sales =$3000,000 X 2.8 = $840,000
3)   Gross profit margin = 23%   
? COGS = 77% of sales
? COGS = ($840,000)(0.77) =$646,800
4)   Inventory turnover = COGS/INV = 7
? inventory = COGS/7 =$92,400

5)   DSO = 36 days   
? Accounts receivable in $ is daily sales times
36 days   
? ($840,000/360) X 36 days = $84,000
6)   Debt ratio = 0.6   
? Debt = (TA)(0.6) ?Total debt = $180,000
? A/P + Long-term debt = $180,000
? A/P = $180,000 - $60,000 = $120,000
7)   common stock = Total Liabilities and C/S - Total
debt - Retained earning
? $300,000 - $180,000 - $97,500 = $22,500
8)   Quick ratio = (Cash + A/R)/A/P
? (Cash + $84,000)/$120,000 = 1.25
Cash + $84,000 = ($120,000)(1.25)
Cash + $84,000 = $150,000
Cash = $66,000
9)   Fixed assets = Total assets

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