Question 1:
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 $420,800, what is the amount of current liabilities?
(b) A company had an average inventory last year of $214,000 and its inventory turnover was 6. If sales volume and unit cost remain the same this year as last and inventory turnover is 9 this year, what will average inventory have to be during the current year? (Round answer to 0 decimal places, e.g. 125.)
(c) A company has current assets of $86,130 (of which $35,390 is inventory and prepaid items) and current liabilities of $35,390. What is the current ratio? What is the acid-test ratio? If the company borrows $14,080 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.)
(d) A company has current assets of $583,600 and current liabilities of $203,700. The board of directors declares a cash dividend of $169,100. 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.)
Question 2:
Heartland Company's budgeted sales and budgeted cost of goods sold for the coming year are $141,850,000 and $102,150,000, respectively. Short-term interest rates are expected to average 10%. If Heartland can increase inventory turnover from its present level of 8 times a year to a level of 12 times per year.
Compute its expected cost savings for the coming year.
Question 3:
The following information pertains to Wamser Company:
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Cash
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$21,000
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|
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Accounts receivable
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125,000
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|
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Inventory
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75,500
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|
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Plant assets (net)
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384,500
|
|
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Total assets
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$606,000
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|
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Accounts payable
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$75,500
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|
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Accrued taxes and expenses payable
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24,500
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|
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Long-term debt
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49,500
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|
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Common stock ($10 par)
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160,000
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|
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Paid-in capital in excess of par
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88,500
|
|
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Retained earnings
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208,000
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|
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Total equities
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$606,000
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|
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Net sales (all on credit)
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$804,500
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|
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Cost of goods sold
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601,000
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|
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Net income
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81,000
|
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Compute the following
(a) Current ratio
(b) Inventory turnover
(c) Accounts receivable turnover
(d) Book value per share $
(e) Earnings per share $
(f) Debt to assets
(g) Profit margin on sales
(h) Return on common stock equity
Question 4:
The following data is given:
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December 31,
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2015
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2014
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Cash
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$66,500
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$49,500
|
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Accounts receivable (net)
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90,000
|
58,500
|
|
Inventories
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90,000
|
112,000
|
|
Plant assets (net)
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382,000
|
323,000
|
|
|
|
|
Accounts payable
|
55,500
|
39,500
|
|
Salaries and wages payable
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12,000
|
5,500
|
|
Bonds payable
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69,000
|
71,500
|
|
8% Preferred stock, $40 par
|
100,000
|
100,000
|
|
Common stock, $10 par
|
120,000
|
90,000
|
|
Paid-in capital in excess of par
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80,000
|
65,000
|
|
Retained earnings
|
192,000
|
171,500
|
|
|
|
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Net credit sales
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910,000
|
|
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Cost of goods sold
|
730,000
|
|
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Net income
|
81,000
|
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Compute the following ratios:
(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 $
Question 5:
As loan analyst for Utrillo Bank, you have been presented the following information.
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Toulouse Co.
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Lautrec Co.
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Assets
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|
|
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Cash
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$111,700
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$320,900
|
|
Receivables
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224,100
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300,000
|
|
Inventories
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564,800
|
517,300
|
|
Total current assets
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900,600
|
1,138,200
|
|
Other assets
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491,000
|
610,500
|
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Total assets
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$1,391,600
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$1,748,700
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|
|
|
|
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Liabilities and Stockholders' Equity
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|
|
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Current liabilities
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$293,900
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$349,900
|
|
Long-term liabilities
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393,700
|
491,000
|
|
Capital stock and retained earnings
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704,000
|
907,800
|
|
Total liabilities and stockholders' equity
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$1,391,600
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$1,748,700
|
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Annual sales
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$942,400
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$1,493,300
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|
Rate of gross profit on sales
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25
|
35
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Each of these companies has requested a loan of $49,650 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. ( Toulouse Co. and Lautrec Co.)
Current ratio :
Acid-test ratio :
Accounts receivable turnover
Inventory turnover
Cash to current liabilities :
Question 6:
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 $35,410 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,430 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 $319,700 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.
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BRADBURN CORPORATION
BALANCE SHEET
MARCH 31
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Assets
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2015
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2014
|
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Cash
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$18,750
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$12,840
|
|
Notes receivable
|
149,460
|
132,500
|
|
Accounts receivable (net)
|
132,060
|
126,240
|
|
Inventories (at cost)
|
105,890
|
51,920
|
|
Plant & equipment (net of depreciation)
|
1,465,800
|
1,426,000
|
|
Total assets
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$1,871,960
|
$1,749,500
|
|
|
|
|
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Liabilities and Owners' Equity
|
|
|
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Accounts payable
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$81,260
|
$92,100
|
|
Notes payable
|
77,250
|
62,470
|
|
Accrued liabilities
|
21,050
|
12,370
|
|
Common stock (130,000 shares, $10 par)
|
1,300,000
|
1,300,000
|
|
Retained earningsa
|
392,400
|
282,560
|
|
Total liabilities and stockholders' equity
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$1,871,960
|
$1,749,500
|
|
|
|
|
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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.
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|
BRADBURN CORPORATION
INCOME STATEMENT
FOR THE FISCAL YEARS ENDED MARCH 31
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|
2015
|
2014
|
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Sales revenue
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$3,019,600
|
$2,720,700
|
|
Cost of goods solda
|
1,541,000
|
1,433,300
|
|
Gross margin
|
1,478,600
|
1,287,400
|
|
Operating expenses
|
862,200
|
787,400
|
|
Income before income taxes
|
616,400
|
500,000
|
|
Income taxes (40%)
|
246,560
|
200,000
|
|
Net income
|
$369,840
|
$300,000
|
|
|
|
|
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aDepreciation charges on the plant and equipment of $112,400 and $114,700 for fiscal years ended March 31, 2014 and 2015, respectively, are included in cost of goods sold.
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(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 $1,695,700 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.
(1) Current ratio:
(2) Acid-test (quick) ratio :
(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