The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,2
ID: 2810162 • Letter: T
Question
The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,200,000, with 75 percent of sales sold on credit.
Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.)
Balance Sheet 20X1 Assets Liabilities and Equity Cash $ 25,000 Accounts payable $ 247,000 Accounts receivable 351,000 Accrued taxes 97,000 Inventory 251,000 Bonds payable (long-term) 136,000 Plant and equipment 423,000 Common stock 100,000 Paid-in capital 150,000 Retained earnings 320,000 Total assets $ 1,050,000 Total liabilities and equity $ 1,050,000
Explanation / Answer
Answer a Current ratio = Current assets / Current Liabilities Current assets = Cash + AR + Inventory = $25000 + $351000 + $251000 = $627,000.00 Current liabilities = Accounts Payable + accrued taxes = $247000 + $97000 = $344,000.00 Current ratio = $627000 / $344000 = 1.82 Answer b Quick ratio = Liquid current assets / Current liabilities Liquid Current assets = Cash + AR = $25000 + $351000 = $376,000.00 Current liabilities = Accounts Payable + accrued taxes = $247000 + $97000 = $344,000.00 Quick ratio = $376000 / $344000 = 1.09 Answer c Debt to total asset ratio = Total Liabilities / Total assets Total assets = $1050000 Total Liabilities = Accounts Payable + accrued taxes + Bonds payable = $247000 + $97000 + $136000 = $480000 Debt to total asset ratio = $480000/$1050000 = 45.71% Answer d Asset turnover ratio = Net Sales / Average Total assets Net Sales = $32,00,000 Let us assume average total assets equivalent to total assets = $10,50,000 Asset turnover ratio = $32,00,000 / $10,50,000 = 3.05 times Answer e Average collection period = 360 days / Accounts receivable turnover ratio Accounts receivable turnover ratio = Credit sales in year / Average Accounts receivables Let us assume average accounts receivables equivalent to accounts receivables = $3,51,000 Credit sales in year = $3200000 * 75% = $24,00,000 Accounts receivable turnover ratio = $24,00,000 / $3,51,000 = 6.84 Average collection period = 360 days / 6.84 = 52.65 days
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.