Question

$ 2,700 3.270 Supplies. Prepaid insurance Accumulated depreciation Equipment Long-term notes payable. 1,500 6,400 . . $ 1,080 845 7,000 3,000 5,205 2,900 Service fees eamed... . 62,400 15,000 33,400 4,700 3,250 720 $79,530 $79,530

Prepare a detailed Balance Sheet and also calculate the following ratios:

A) Current Ratio

B) Working Capital

C) Assets Turnover

D) Fixed Assets Turnover

E) A/R Turnover

F) Debt Ratio

Answer 1

A	B	C	D	E	F	G
2
3		A)
4
5		Current Ratio	=Current Assets / Current Liabilities
6
7		Cash	$2,700
8		Accounts Receivable	$3,270
9		Supplies	$5,060
10		Prepaid insurance	$1,500
11		Current Assets	$12,530	=SUM(D7:D10)
12
13		Accounts Payable	$845
14		Current Liabilities	$845
15
16		Current Ratio	=Current Assets / Current Liabilities
17			14.83	=D11/D14
18
19		Hence current ratio is	14.83
20
21		B)
22
23		Working capital	=Current Assets - Current Liabilities
24			=12530-845
25			$11,685
26
27		Hence working capital is	$11,685
28
29		C)
30
31		Asset Turnover	=Total Sales / Total Assets
32
33		Total Sales	$62,400
34
35		Current Assets	$12,530
36		Equipment	$6,400
37		Accumulated depreciation - Equipment	($1,080)
38		Total Assets	$17,850	=SUM(D35:D37)
39
40		Asset Turnover	=Total Sales / Total Assets
41			$3.50	=D33/D38
42
43		Hence Asset Turnover is	$3.50
44
45		D)
46
47		Fixed asset turnover	=Total Sales/ Net fixed assets
48
49		Equipment	$6,400
50		Accumulated depreciation - Equipment	($1,080)
51		Net Fixed Assets	$5,320	=SUM(D48:D50)
52
53		Revenue	$62,400
54
55		Fixed asset turnover	=Total Sales/ Net fixed assets
56			11.73	=D53/D51
57
58		Hence Fixed asset turnover is	11.73
59
60		E)
61
62		A/R Turnover	=Credit Sales / Accounts Receivable
63			=62400/3270
64			19.08
65
66		Hence A/R Turnover	19.08
67
68		F)
69
70		Debt Ratio	=Total Debt / Total Assets
71
72		Total Debt	=Long term notes payables
73			$7,000
74
75		Total Assets	$17,850
76
77		Debt Ratio	=Total Debt / Total Assets
78			0.39	=D73/D75
79
80		Hence Debt Ratio is	0.39
81