Question

E13-19 (L04) (Ratio Computations and Effect of Transactions) Presented below is information related to Carver Inc CARVER INC. BALANCE SHEET DECEMBER 31, 2017 50,000 32,000 5,000 260,000 141,000 Cash Receivables $ 45,000 Notes payable (short-term) Accounts payable Accrued liabilities Common stock (par $5) Retained earnings $110,000 15,000 Less: Allowance Inventory Prepaid insurance Land Equipment (net) 95,000 170,000 8,000 20,000 150,000 $488,000 $488,000 CARVER INC INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $1,400,000 Cost of goods sold Inventory, Jan. 1,2017 Purchases Cost of goods available for sale Inventory, Dec. 31,2017 Cost of goods sold $200,000 790,000 990,000 (170,000) Gross profit on sales Operating expenses Net income 820,000 580,000 170,000 $ 410,000 Instructions (a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representa tive unless the information provided indicates differently (1) Currnt ratio. (2) Inventory turnover (3) Accounts receivable turnover. (4) Earnings per shane (5) Profit margin on sales. (6) Return on assets on December 31, 2017 Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2017 (1) Write off an uncollectible account receivable, $2,200. (2) Purchase additional capital stock for cash. (3) Pay $40,000 on notes payable (short-term) 4) Collect $23,000 on accounts receivable (5) Buy equipmen (6) Give an existing creditor a short-term note in settlement of account (b) t on account.

Answer 1