(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 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
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.
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
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)