| CHAPTER 3 PROBLEMS |
| UNDERSTANDING FINANCIAL STATEMENTS |
| AND CASH FLOW |
| CT 3 -1 | Chapter 3 |
| WORKING WITH BALANCE SHEET |
| DATA |
| Cash | | 100,000 |
| Account receivables | | 72,000 |
| Accounts payable | | 48,000 |
| Short-term notes payable | | 35,000 |
| Inventories | | 70,000 |
| Gross fixed assets | | 1,750,000 |
| Common stock | | 680,000 |
| Other current assets | | 10,000 |
| Accumulated depreciation | | 524,000 |
| Long-term debt | | 350,000 |
| Other assets | | 25,000 |
| Retained earnings | | ? |
| a. Prepare a balance sheet in good form from the information above. |
| b, Calculate net working capital |
| c. Calculate the debt ratio |
| b. Working capital = |
| c. Debt ratio = |
| CT 3 - 2 | Chapter 3 & 4 |
| WORKING WITH THE INCOME STATEMENT |
| DATA |
| Sales | | $525,000 |
| Cost of goods sold | | $200,000 |
| General and administrative expenses | | $62,000 |
| Depreciation expenses | | 8,000 |
| Interest expense | | 12,000 |
| Income taxes | | 97,200 |
| Given the information above, please prepare (a) the income statement in good form, and |
| (b) the common-sized income statement. |
| CT 3 - 3 | Chapter 3 |
| WORKING WITH STATEMENT OF CASH FLOWS |
| Prepare a statement of cash flows from the following scrambled list of items. |
| DATA |
| Increase in inventories | | 22,000 |
| Operating income | | 625,000 |
| Dividends | | 55,000 |
| Increase in accounts payables | | 92,500 |
| Interest expense | | 118,000 |
| Increase in common stock | | 22,000 |
| Depreciation expense | | 48,000 |
| Increase in accounts receivable | | 210,000 |
| Increase in long-term debt | | 145,000 |
| Increase in short-term notes payable | | 36,500 |
| Increase in gross fixed assets | | 144,000 |
| Increase in paid in capital | | 60,000 |
| Income taxes | | 202,000 |
| Beginning cash | | 700,000 |
| Answer: |
| CT 3 - 4 | Chapter 4 |
| RATIO ANALYSIS |
| The Balance Sheet and the Income Statement for Saudi Manufacturing Corporation are as follows: |
| DATA |
| Balance Sheet: |
| Cash | | 30,000 |
| Acct/Rec | | 72,500 |
| Inventories | | 50,000 |
| Current assets | | 152,500 |
| Net fixed assets | | 240,000 |
| Total assets | | 392,500 |
| Accts/Pay | | 44,500 |
| Accrued expenses | | 31,000 |
| Short-term N/P | | 9,500 |
| Current liabilities | | 85,000 |
| Long-term debt | | 110,000 |
| Owner's equity | | 197,500 |
| Total liabilities and owners equity | | 392,500 |
| Income Statement: |
| Net sales | | 450,000 |
| COGS | | 220,000 |
| Gross profit | | 230,000 |
| Operating expenses | | 128,000 |
| Net operating income | | 102,000 |
| Interest expense | | 18,500 |
| EBT | | 83,500 |
| Income taxes | | 33,000 |
| Net income | | 50,500 |
| Calculate the following ratios: |
| Current ratio = |
| Debt ratio = |
| Times interest earned = |
| Average collection period = |
| Inventory turnover = |
| Fixed asset turnover = |
| Total asset turnover = |
| Operating profit margin = |
| Operating return on assets = |
| Return on equity = |
| CT 3 - 5 | Chapter 4 |
| MARKET-VALUE RATIOS |
| Medina Industries has a price earning ratio of 22.40X. |
| a. If Medina's earnings per share are SAR 3.10, what is the price per share of Jeddah's stock? |
| b. Using the price per share you calculated in part a, determine the price / book ratio if Medina's equity-book value is SAR 15.20. |
| DATA |
| Price/earnings ratio | | 22.4X |
| Earnings per share (SAR) | | 3.10 |
| Equity book value (SAR) | | 15.20 |
| Solution |
| a. Price per share |
| b. Price/book ratio |
| CT 3 - 6 | Chapter 4 |
| COMPUTING RATIOS |
| Use the information from the balance sheet and income statement below to calculate the ratios listed below: |
| DATA |
| ASSETS |
| Cash | | 210,000 |
| Accounts receivable | | 92,000 |
| Inventory | | 115,500 |
| Prepaid expenses | | 12,500 |
| Total current assets | | 430,000 |
| Gross plant and equipment | | 1,305,000 |
| Accumulated depreciation | | -218,000 |
| Net plant and equipment | | 1,087,000 |
| Total assets | | 1,517,000 |
| DEBT AND EQUITY |
| Accounts payable | | 210,000 |
| Accrued liabilities | | 148,000 |
| Total current debt | | 358,000 |
| Long-term debt | | 425,000 |
| Common stock | | 500,000 |
| Retained earnings | | 234,000 |
| Total debt and equity | | 1,517,000 |
| Sales | | 480,000 |
| Cost of goods sold | | -210,000 |
| Gross profit | | 270,000 |
| Selling, general, and administrative expenses | | -65,000 |
| Depreciation expense | | -42,000 |
| Operating income | | 163,000 |
| Interest expense | | -30,000 |
| Earnings before taxes | | 133,000 |
| Taxes | | -48,000 |
| Earnings available to common shareholders | | 85,000 |
| Solution |
| RATIOS |
| Current ratio |
| Acid-test ratio |
| Times interest earned |
| Inventory turnover |
| Total asset turnover |
| Operating profit margin |
| Days in receivables |
| Operating return on assets |
| Debt ratio |
| Fixed asset turnover |
| Return on equity |
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FIN500-Chapter3Problems.xlsx
