Accounting Audit Case: Keystone Computers & Networks, Inc.
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projectquestion.docx6C-4
The working paper for Keystone Computers & Networks' analytical review ratios is presented in this Appendix.
a. Recalculate the 12/31/X5 ratios using Excel.
|
|
|
20X5 |
|
20X4 |
|
Industry |
|
|
|
|
|
|
|
|
|
Current ratio |
|
1.1 |
|
1.2 |
|
1.3 |
|
Days sales in average accounts receivable |
|
37.0 |
|
32.3 |
|
37.0 |
|
Allowance for doubtful accounts / accounts receivable |
|
1.0% |
|
1.1% |
|
- |
|
Bad debt expenses/net sales |
|
0.3% |
|
0.2% |
|
- |
|
Total liabilities to net worth |
|
3.5 |
|
2.7 |
|
2.9 |
|
Return on total assets |
|
1.7% |
|
8.3% |
|
9.0% |
|
Return on net worth |
|
7.5% |
|
30.5% |
|
29.0% |
|
Return on net sales |
|
0.2% |
|
1.0% |
|
2.3% |
|
Gross profit/net sales |
|
22.1% |
|
23.2% |
|
24.0% |
|
Selling, operating and admin expense / net sales |
|
21.2% |
|
21.4% |
|
23.9% |
b. After completing part (a), review the ratios and identify financial statement accounts that should be investigated because the related ratios are not comparable to prior-year ratios, industry averages, or your knowledge of the company.
1.
2.
3.
4.
5.
c. For each account identified in part (b), list potential reasons for the unexpected account balances and related ratios.
