Answer each of the questions in the following unrelated situations.(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 $494,800, what is the amount of current liabilities?
Current Liabilities
$
(b) A company had an average inventory last year of $159,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)Average Inventory
$
(c) A company has current assets of $89,370 (of which $36,250 is inventory and prepaid items) and current liabilities of $36,250. What is the current ratio? What is the acid-test ratio? If the company borrows $10,270 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
:1Acid Test Ratio
:1New Current Ratio
:1New Acid Test Ratio
:1(d) A company has current assets of $583,200 and current liabilities of $235,100. The board of directors declares a cash dividend of $173,600. 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
:1Current ratio after the payment of the dividend
:1
Heartland Company’s budgeted sales and budgeted cost of goods sold for the coming year are $142,310,000 and $97,650,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 9 times a year to a level of 12 times per year.Compute its expected cost savings for the coming year.
The following information pertains to Wamser Company:
Cash $22,000 Accounts receivable 125,500 Inventory 74,500 Plant assets (net) 384,000 Total assets $606,000 Accounts payable $74,500 Accrued taxes and expenses payable 24,500 Long-term debt 49,500 Common stock ($10 par) 165,000 Paid-in capital in excess of par 89,000 Retained earnings 203,500 Total equities $606,000 Net sales (all on credit) $801,000 Cost of goods sold 605,000 Net income 80,500 Compute the following: (Round answers to 2 decimal places e.g. 15.25.)(a) Current ratio
: 1 (b) Inventory turnover
times (c) Accounts receivable turnover
times (d) Book value per share $
(e) Earnings per share $
(f) Debt to assets
% (g) Profit margin on sales
% (h) Return on common stock equity
%
The following data is given:
December 31, 2015 2014 Cash $65,500 $51,000 Accounts receivable (net) 89,500 59,000 Inventories 89,500 115,000 Plant assets (net) 383,000 325,000 Accounts payable 55,000 40,000 Salaries and wages payable 10,000 5,000 Bonds payable 70,500 71,000 8% Preferred stock, $40 par 100,000 100,000 Common stock, $10 par 120,000 90,000 Paid-in capital in excess of par 85,000 70,000 Retained earnings 187,000 174,000 Net credit sales 905,000 Cost of goods sold 745,000 Net income 83,000 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
As loan analyst for Utrillo Bank, you have been presented the following information.
Toulouse Co.
Lautrec Co.
Assets Cash $116,300 $311,800 Receivables 220,600 305,700 Inventories 573,900 512,000 Total current assets 910,800 1,129,500 Other assets 500,500 617,600 Total assets $1,411,300 $1,747,100 Liabilities and Stockholders’ Equity Current liabilities $303,300 $350,200 Long-term liabilities 403,900 500,500 Capital stock and retained earnings 704,100 896,400 Total liabilities and stockholders’ equity $1,411,300 $1,747,100 Annual sales $944,400 $1,494,000 Rate of gross profit on sales 30% 35%Each of these companies has requested a loan of $49,190 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
: 1Acid-test ratio
: 1
: 1Accounts receivable turnover
times
timesInventory turnover
times
timesCash 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 $35,120 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,450 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 $306,700 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 CORPORATIONBALANCE SHEETMARCH 31
Assets
2015
2014
Cash $18,700 $13,020Notes receivable 148,930 133,260Accounts receivable (net) 132,830 126,510Inventories (at cost) 105,160 51,630Plant & equipment (net of depreciation) 1,459,800 1,422,000 Total assets $1,865,420 $1,746,420 Liabilities and Owners’ Equity Accounts payable $81,630 $91,500Notes payable 76,690 63,050Accrued liabilities 16,718 9,000Common stock (130,000 shares, $10 par) 1,300,000 1,300,000Retained earningsa 390,382 282,870 Total liabilities and stockholders’ equity $1,865,420 $1,746,420 aCash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015.
BRADBURN CORPORATIONINCOME STATEMENTFOR THE FISCAL YEARS ENDED MARCH 31
2015
2014
Sales revenue $3,013,400 $2,719,000Cost of goods solda 1,539,400 1,431,400Gross margin 1,474,000 1,287,600Operating expenses 861,480 790,300Income before income taxes 612,520 497,300Income taxes (40%) 245,008 198,920Net income $367,512 $298,380 aDepreciation charges on the plant and equipment of $110,200 and $112,800 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.(4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,693,000 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) Inventory turnover
times(4) Return on assets
%
%(5) Percent Changes Percent Increase Sales revenue
% Cost of goods sold
% Gross margin
% Net income after taxes
%
