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(a) The current ratio of a company is 61 and its acid-test ratio .docx

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(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? Current Liabilities $ 89100 (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.) Average Inventory $ 96857 (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.) Current Ratio 2.47  :1 Acid Test Ratio  :1 New Current Ratio  :1 New Acid Test Ratio  :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.) Current ratio after the declaration but before payment  :1 Current ratio after the payment of the dividend  :1 The following data is given: December 31, 2015 2014 Cash $66,000 $52,000 Accounts receivable (net) 90,000 60,000 Inventories 90,000 105,000 Plant assets (net) 380,500 320,000 Accounts payable 54,500 41,500 Salaries and wages payable 11,500 5,000 Bonds payable 70,500 70,000 8% Preferred stock, $40 par 100,000 100,000 Common stock, $10 par 120,000 90,000 Paid-in capital in excess of par 80,000 70,000 Retained earnings 190,000 160,500 Net credit sales 930,000 Cost of goods sold 735,000 Net income 81,000 Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.) (a) Acid-test ratio at 12/31/15 : 1 (b) Accounts receivable turnover in 2015 times (c) Inventory turnover in 2015 times (d) Profit margin on sales in 2015 % (e) Return on common stock equity in 2015 % (f) Book value per share of common stock at 12/31/15 $ Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the following information. Toulouse Co. Lautrec Co. Assets Cash $113,900 $311,200 Receivables 227,200 302,700 Inventories 571,200 510,700    Total current assets 912,300 1,124,600 Other assets 506,000 619,800    Total assets $1,418,300 $1,744,400 Liabilities and Stockholders’ Equity Current liabilities $291,300 $350,400 Long-term liabilities 390,800 506,000 Capital stock and retained earnings 736,200 888,000    Total liabilities and stockholders’ equity $1.

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(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? Current Liabilities $ 89100 (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.) Average Inventory $ 96857 (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.) Current Ratio 2.47 :1 Acid Test Ratio :1 New Current Ratio

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:1 New Acid Test Ratio :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.) Current ratio after the declaration but before payment :1 Current ratio after the payment of the dividend :1 The following data is given: December 31, 2015 2014 Cash

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$66,000 $52,000 Accounts receivable (net) 90,000 60,000 Inventories 90,000 105,000 Plant assets (net) 380,500 320,000

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Accounts payable 54,500 41,500 Salaries and wages payable 11,500 5,000 Bonds payable 70,500 70,000 8% Preferred stock, $40 par 100,000 100,000 Common stock, $10 par

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120,000 90,000 Paid-in capital in excess of par 80,000 70,000 Retained earnings 190,000 160,500 Net credit sales 930,000

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Cost of goods sold 735,000 Net income 81,000 Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.) (a) Acid-test ratio at 12/31/15 : 1 (b) Accounts receivable turnover in 2015 times

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(c) Inventory turnover in 2015 times (d) Profit margin on sales in 2015 % (e) Return on common stock equity in 2015 % (f) Book value per share of common stock at 12/31/15 $ Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the following information.

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Toulouse Co. Lautrec Co. Assets Cash $113,900 $311,200 Receivables 227,200 302,700 Inventories 571,200 510,700 Total current assets 912,300

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1,124,600 Other assets 506,000 619,800 Total assets $1,418,300 $1,744,400 Liabilities and Stockholders’ Equity Current liabilities $291,300 $350,400

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Long-term liabilities 390,800 506,000 Capital stock and retained earnings 736,200 888,000 Total liabilities and stockholders’ equity $1,418,300 $1,744,400 Annual sales $948,800 $1,511,200 Rate of gross profit on sales 30 % 40 %

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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.) Toulouse Co. Lautrec Co. Current ratio : 1 : 1 Acid-test ratio : 1 : 1 Accounts receivable turnover times times Inventory turnover

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times times Cash to current liabilities : 1 : 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. BRADBURN CORPORATION BALANCE SHEET MARCH 31 Assets 2015

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2014 Cash $18,490 $13,320 Notes receivable 149,540 132,760 Accounts receivable (net) 135,340 126,940 Inventories (at cost) 107,140 51,560 Plant & equipment (net of depreciation) 1,467,900 1,421,000 Total assets $1,878,410 $1,745,580

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Liabilities and Owners’ Equity Accounts payable $80,300 $91,140 Notes payable 76,500 63,120 Accrued liabilities 38,286 8,380 Common stock (130,000 shares, $10 par) 1,300,000 1,300,000 Retained earningsa 383,324 282,940 Total liabilities and stockholders’ equity $1,878,410 $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. BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2015 2014 Sales revenue $3,006,300 $2,716,800 Cost of goods solda 1,543,000 1,425,600 Gross margin 1,463,300 1,291,200 Operating expenses 862,660 784,800

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Income before income taxes 600,640 506,400 Income taxes (40%) 240,256 202,560 Net income $360,384 $303,840 aDepreciation charges on the plant and equipment of $110,800 and $113,100 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. (a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.) (1) Current ratio for fiscal years 2014 and 2015. (2) Acid-test (quick) ratio for fiscal years 2014 and 2015. (3) Inventory turnover for fiscal year 2015.

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(4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,698,600 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. 2014 2015 (1) Current ratio :1 :1 (2) Acid-test (quick) ratio :1 :1 (3)

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Inventory turnover times (4) Return on assets % % (5) Percent Changes Percent Increase Sales revenue % Cost of goods sold %

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Gross margin % Net income after taxes %

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(a) The current ratio of a company is 61 and its acid-test ratio .docx

  • 1. (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? Current Liabilities $ 89100 (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.) Average Inventory $ 96857 (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.) Current Ratio 2.47 :1 Acid Test Ratio :1 New Current Ratio
  • 2. :1 New Acid Test Ratio :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.) Current ratio after the declaration but before payment :1 Current ratio after the payment of the dividend :1 The following data is given: December 31, 2015 2014 Cash
  • 4. Accounts payable 54,500 41,500 Salaries and wages payable 11,500 5,000 Bonds payable 70,500 70,000 8% Preferred stock, $40 par 100,000 100,000 Common stock, $10 par
  • 5. 120,000 90,000 Paid-in capital in excess of par 80,000 70,000 Retained earnings 190,000 160,500 Net credit sales 930,000
  • 6. Cost of goods sold 735,000 Net income 81,000 Compute the following ratios: (Round answers to 2 decimal places e.g. 15.25.) (a) Acid-test ratio at 12/31/15 : 1 (b) Accounts receivable turnover in 2015 times
  • 7. (c) Inventory turnover in 2015 times (d) Profit margin on sales in 2015 % (e) Return on common stock equity in 2015 % (f) Book value per share of common stock at 12/31/15 $ Exercise 24-4 As loan analyst for Utrillo Bank, you have been presented the following information.
  • 9. 1,124,600 Other assets 506,000 619,800 Total assets $1,418,300 $1,744,400 Liabilities and Stockholders’ Equity Current liabilities $291,300 $350,400
  • 10. Long-term liabilities 390,800 506,000 Capital stock and retained earnings 736,200 888,000 Total liabilities and stockholders’ equity $1,418,300 $1,744,400 Annual sales $948,800 $1,511,200 Rate of gross profit on sales 30 % 40 %
  • 11. 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.) Toulouse Co. Lautrec Co. Current ratio : 1 : 1 Acid-test ratio : 1 : 1 Accounts receivable turnover times times Inventory turnover
  • 12. times times Cash to current liabilities : 1 : 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. BRADBURN CORPORATION BALANCE SHEET MARCH 31 Assets 2015
  • 13. 2014 Cash $18,490 $13,320 Notes receivable 149,540 132,760 Accounts receivable (net) 135,340 126,940 Inventories (at cost) 107,140 51,560 Plant & equipment (net of depreciation) 1,467,900 1,421,000 Total assets $1,878,410 $1,745,580
  • 14. Liabilities and Owners’ Equity Accounts payable $80,300 $91,140 Notes payable 76,500 63,120 Accrued liabilities 38,286 8,380 Common stock (130,000 shares, $10 par) 1,300,000 1,300,000 Retained earningsa 383,324 282,940 Total liabilities and stockholders’ equity $1,878,410 $1,745,580
  • 15. aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. BRADBURN CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31 2015 2014 Sales revenue $3,006,300 $2,716,800 Cost of goods solda 1,543,000 1,425,600 Gross margin 1,463,300 1,291,200 Operating expenses 862,660 784,800
  • 16. Income before income taxes 600,640 506,400 Income taxes (40%) 240,256 202,560 Net income $360,384 $303,840 aDepreciation charges on the plant and equipment of $110,800 and $113,100 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold. (a) Compute the following items for Bradburn Corporation. (Round answer to 2 decimal places, e.g. 2.25.) (1) Current ratio for fiscal years 2014 and 2015. (2) Acid-test (quick) ratio for fiscal years 2014 and 2015. (3) Inventory turnover for fiscal year 2015.
  • 17. (4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,698,600 at 3/31/13.) (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. 2014 2015 (1) Current ratio :1 :1 (2) Acid-test (quick) ratio :1 :1 (3)
  • 18. Inventory turnover times (4) Return on assets % % (5) Percent Changes Percent Increase Sales revenue % Cost of goods sold %
  • 19. Gross margin % Net income after taxes %