Question

Cost of JUU Cash Inventory 10.UUU Taxes payable 25.000 Land 1.000 Notes payable (due in 6 months) Salaries payable 900 4,300 Requirements: A Compute the quick ratio. 2.04 B. Determine the amount of working capital. 18, SOO C. Assume that cash is used to pay the balance due on accounts payable. 1. Compute the new quick ratio. 2.79 2. Compute the Swemount of working capital. 18, Soo D. Compute the accounts payable turnover ratio (use year-end amounts.) in the amou used to pay the 2.19 18,500 2:13 Note: For question D, we do not have beginning balance in questioni, so you could use" 1500"as the average Accounts Payable, and"3200" as the numerator to calculate the accounts payable turnover ratio. 2) According to the producer price index database maintained by the Bureau of Labor Statistics the average cost of computer equipment fell 20.9 percent between 2007 and 2008. Let's see whether these changes are reflected in the income statement of Computer Tycoon Inc. for the year ended December 31, 2008. 2008 $98,913 59,249 39,664 36,943 Sales Revenues Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2007 $121,761 71,583 50,178 36,934 474 12,770 5,540 $ 7,230 565 2,156 1,024 $ 1,132

Answer 1

Answer is given below

A Horizontal Analysis 2008 Sales Revenue Cost of Goods sold Gross profit Selling, General and administrative expenses Interest Expense Income before Income tax expense Income tax expense Net income $98,913 $59,249 $39,664 $36,943 $565 $2,156 $1,024 $1,132 YOY 2007 % Change Changes $121,761 $22,848 -18.8% $71,583 -$12,334 -17.2% $50,178 -$10,514 -21.0% $36,934 0.0% $474 $91 19.2% $12,770 -$10,614 -83.1% $5,540 $4,516 -81.5% $7,230 $6,098 -84.3% The average cost of computer has fallen by 20.9% whereas the sales variance computed above is 18.8% lower That means the average cost of computer equipment drop is lower for Computer Tycoon Inc. There might have been higher volume sales also to offset this drop in average cost of computer equipment B Vertical Analysis Sales Revenue Cost of Goods sold Gross profit Selling, General and administrative expenses Interest Expense Income before Income tax expense Income tax expense Net income 2008 $98,913 $59,249 $39,664 $36,943 $565 % Change 100.0% 59.9% 40.1% 37.3% 0.6% 2.2% 1.0% 1.1% 2007 % Change $121,761 100.0% $71,583 58.8% $50,178 41.2% $36,934 30.3% $474 0.4% $12,770 10.5% $5,540 4.5% $7,230 5.9% $2,1561 $1,024 $1,132 Gross profit ratio of 2008 is lower than 2007. Thereby Computer Tycoon earned less profit per dollar of sales in 2008 compared to 2007