Question

Sunland 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 Sunland and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,320 notes, which are due on June 30, 2018, and September 30, 2018. Another note of $5,940 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Sunland’s cash flow problems are due primarily to the company’s desire to finance a $302,050 plant expansion over the next 2 fiscal years through internally generated funds.

SUNLAND CORPORATION BALANCE SHEET MARCH 31
Assets		2018		2017
Cash		$18,130		$12,400
Notes receivable		148,340		132,610
Accounts receivable (net)		132,970		125,610
Inventories (at cost)		105,280		49,700
Plant & equipment (net of depreciation)		1,442,810		1,431,850
Total assets		$1,847,530		$1,752,170
Liabilities and Owners’ Equity
Accounts payable		$78,630		$90,790
Notes payable		76,150		61,850
Accrued liabilities		18,540		29,430
Common stock (130,000 shares, $10 par)		1,289,230		1,290,910
Retained earningsa		384,980		279,190
Total liabilities and stockholders’ equity		$1,847,530		$1,752,170
aCash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018.

SUNLAND CORPORATION INCOME STATEMENT FOR THE FISCAL YEARS ENDED MARCH 31
		2018		2017
Sales revenue		$3,007,270		$2,709,810
Cost of goods solda		1,522,790		1,432,430
Gross margin		1,484,480		1,277,380
Operating expenses		860,800		775,260
Income before income taxes		623,680		502,120
Income taxes (40%)		249,472		200,848
Net income		$374,208		$301,272
aDepreciation charges on the plant and equipment of $100,160 and $103,110 for fiscal years ended March 31, 2017 and 2018, respectively, are included in cost of goods sold.

(a) Compute the following items for Sunland Corporation. (Round answer to 2 decimal places, e.g. 2.25 or 2.25%.)

				2017			2018
(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			%

Answer 1

Answer with working is given below

a 1) 2017 2018 Current Ratio Current Assets Current Liabilities | $404,720 $173,320 2.34:1 $320,320 $182,070 1.76:1 2) 2017 2018 Quick Ratio Quick Current Assets* Current Liabilities *Excludes Inventory $299,440 $173,320 1.73:1 $270,620 $182,070 1.49:1 3) 2017 2018 Inventory Turnover Cost of Goods Sold Inventory $1,522,790 $105,280 14.46 $1,432,430 $49,700 28.82 Times 4) 2017 2018 Return on Assets Net Income Total Assets $374,208 $1,847,530 20.3% $301,272 $1,752,170 17.2% Percent changes Sales Revenue Cost of Goods sold Gross Margin Net income after taxes 2018 $3,007,270 $1,522,790 $1,484,480 $374,208 2017 % Increase $2,709,810 11.0% $1,432,430 6.3% $1,277,380 16.2% $301,272 24.2%