Accounting homework- 4 questions
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Accounting.docx(a) The current ratio of a company is 6:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to $445,500, what is the amount of current liabilities?
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Current Liabilities |
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$
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(b) A company had an average inventory last year of $113,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 7 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)
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Average Inventory |
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$
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(c) A company has current assets of $88,800 (of which $35,960 is inventory and prepaid items) and current liabilities of $35,960. What is the current ratio? What is the acid-test ratio? If the company borrows $12,970 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (Round answers to 2 decimal places, e.g. 2.50.)
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Current Ratio |
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:1 |
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Acid Test Ratio |
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:1 |
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New Current Ratio |
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:1 |
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New Acid Test Ratio |
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:1 |
(d) A company has current assets of $586,700 and current liabilities of $200,100. The board of directors declares a cash dividend of $173,700. What is the current ratio after the declaration but before payment? What is the current ratio after the payment of the dividend? (Round answers to 2 decimal places, e.g. 2.50.)
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Current ratio after the declaration but before payment |
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:1 |
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Current ratio after the payment of the dividend |
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:1 |
The following data is given:
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December 31, |
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2015 |
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2014 |
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Cash |
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$66,000 |
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$52,000 |
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Accounts receivable (net) |
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90,000 |
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60,000 |
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Inventories |
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90,000 |
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105,000 |
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Plant assets (net) |
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380,500 |
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320,000 |
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Accounts payable |
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54,500 |
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41,500 |
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Salaries and wages payable |
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11,500 |
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5,000 |
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Bonds payable |
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70,500 |
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70,000 |
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8% Preferred stock, $40 par |
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100,000 |
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100,000 |
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Common stock, $10 par |
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120,000 |
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90,000 |
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Paid-in capital in excess of par |
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80,000 |
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70,000 |
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Retained earnings |
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190,000 |
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160,500 |
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Net credit sales |
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930,000 |
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Cost of goods sold |
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735,000 |
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Net income |
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81,000 |
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Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.)
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(a) |
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Acid-test ratio at 12/31/15 |
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: 1 |
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(b) |
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Accounts receivable turnover in 2015 |
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times |
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(c) |
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Inventory turnover in 2015 |
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times |
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(d) |
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Profit margin on sales in 2015 |
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% |
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(e) |
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Return on common stock equity in 2015 |
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% |
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(f) |
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Book value per share of common stock at 12/31/15 |
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$ |
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Exercise 24-4
As loan analyst for Utrillo Bank, you have been presented the following information.
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Toulouse Co. |
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Lautrec Co. |
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Assets |
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Cash |
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$113,900 |
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$311,200 |
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Receivables |
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227,200 |
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302,700 |
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Inventories |
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571,200 |
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510,700 |
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Total current assets |
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912,300 |
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1,124,600 |
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Other assets |
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506,000 |
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619,800 |
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Total assets |
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$1,418,300 |
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$1,744,400 |
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Liabilities and Stockholders’ Equity |
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Current liabilities |
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$291,300 |
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$350,400 |
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Long-term liabilities |
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390,800 |
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506,000 |
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Capital stock and retained earnings |
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736,200 |
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888,000 |
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Total liabilities and stockholders’ equity |
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$1,418,300 |
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$1,744,400 |
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Annual sales |
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$948,800 |
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$1,511,200 |
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Rate of gross profit on sales |
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30 |
% |
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40 |
% |
Each of these companies has requested a loan of $50,340 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one of these requests is to be granted. Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)
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Toulouse Co. |
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Lautrec Co. |
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Current ratio |
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: 1 |
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: 1 |
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Acid-test ratio |
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: 1 |
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: 1 |
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Accounts receivable turnover |
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times |
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times |
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Inventory turnover |
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times |
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times |
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Cash to current liabilities |
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: 1 |
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: 1 |
Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2015, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,190 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,120 is due on March 31, 2016, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburn’s cash flow problems are due primarily to the company’s desire to finance a $306,600 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years.
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BRADBURN CORPORATION BALANCE SHEET MARCH 31 |
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Assets |
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2015 |
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2014 |
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Cash |
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$18,490 |
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$13,320 |
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Notes receivable |
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149,540 |
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132,760 |
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Accounts receivable (net) |
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135,340 |
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126,940 |
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Inventories (at cost) |
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107,140 |
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51,560 |
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Plant & equipment (net of depreciation) |
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1,467,900 |
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1,421,000 |
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Total assets |
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$1,878,410 |
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$1,745,580 |
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Liabilities and Owners’ Equity |
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Accounts payable |
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$80,300 |
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$91,140 |
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Notes payable |
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76,500 |
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63,120 |
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Accrued liabilities |
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38,286 |
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8,380 |
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Common stock (130,000 shares, $10 par) |
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1,300,000 |
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1,300,000 |
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Retained earningsa |
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383,324 |
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282,940 |
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Total liabilities and stockholders’ equity |
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$1,878,410 |
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$1,745,580 |
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aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. |
(a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.)
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(1) |
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Current ratio for fiscal years 2014 and 2015. |
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(2) |
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Acid-test (quick) ratio for fiscal years 2014 and 2015. |
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(3) |
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Inventory turnover for fiscal year 2015. |
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(4) |
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Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,698,600 at 3/31/13.) |
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(5) |
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Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. |
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2014 |
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2015 |
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(1) |
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Current ratio |
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:1 |
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:1 |
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(2) |
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Acid-test (quick) ratio |
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:1 |
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:1 |
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(3) |
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Inventory turnover |
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times |
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(4) |
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Return on assets |
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% |
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% |
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(5) |
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Percent Changes |
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Percent Increase |
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Sales revenue |
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% |
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Cost of goods sold |
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% |
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Gross margin |
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% |
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Net income after taxes |
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% |
