Question 2 The condensed financial statements of Marks Company for the years 201
ID: 2816540 • Letter: Q
Question
Question 2
The condensed financial statements of Marks Company for the years 2014-2015 are presented below:
Compute the following financial ratios by placing the proper amounts for numerators and denominators. (Round per unit answers to 2 decimal places, e.g. 52.75.)
Comparative Balance Sheets
As of December 31, 2014 and 2015 2015 2014 Cash $394,000 $150,000 Accounts receivable (net) 355,000 302,000 Inventories 381,000 341,000 Plant and equipment 1,845,000 1,113,000 Accumulated depreciation (265,000 ) (195,000 ) $2,710,000 $1,711,000 Accounts payable $341,000 $165,000 Dividends payable -0- 45,000 Bonds payable 401,000 -0- Common stock ($10 par) 1,523,000 1,220,000 Retained earnings 445,000 281,000 $2,710,000 $1,711,000
Explanation / Answer
A)Current Asset 2015 = Cash +Accounts reeivable +Inventories
= 394000+355000+ 381000
= 1130000
Current liabilities= Accounts payable+ dividend payable
= 341000+0
= 341000
Current Ratio =current asset /current liability
= 1130000/341000
=3.31
b)Acid test ratio = [Current asset -Inventory]/current liabilities
= [1130000-381000]/341000
= 749000/ 341000
= 2.20
c)Accounts receivable turnover in 2015 = Sales /Average accounts receivable
= 2428000 / 328500
= 7.39
**Average receivable = [355000+302000]/2
= 328500
d)Inventory turnover in 2015 = cost of sales /Average inventory
= 1648000 / 361000
= 4.57
**Average inventory =[381000+341000]/2
= 361000
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