Question

ACC 112 Project 1B The below represents the comparative financial statements of Kamla Corporation. Kamla Corporation Comparative Income Statement For the Years Ended December 31, 2016 and 2015 2016 2015 Net sales (all on account) $1,238,000 $1,006,000 Expenses: Cost of goods sold $826,000 $706,000 Selling and administrative 208,000 218,000 Interest expense 12,000 14,000 Income tax expense 35,000 23,000 Total expenses $959,000 $1,083,000 $47,000 $155,000 Net income Kamla Corporation Comparative Balance Sheet December 31, 2016 and 2015 2015 2016 Assets Current assets: $37,700 $38,000 Cash 28,200 36,000 Notes receivable 149,600 171,600 Accounts receivable (net) 135,400 182,000 Inventory 427,600 350,900 Total current assets 778,000 850,000 Property, plant, and equipment (net) $1,277,600 $1,128,900 Total assets Liabilities and Stockholders' Equity Current liabilities:

Answer 1

Answer to Part 1.

Current Ratio = Current Assets/ Current Liabilities

Current Ratio = $427,600/ $287,600

Current Ratio = 1.49: 1

For every dollar of Current Liabilities the company needs to pay, it has $1.49 of current assets to utilize.

Answer to Part 2.

Acid- Test Ratio = (Cash + Notes Receivable + Accounts Receivable)/ Current Liabilities

Acid-Test Ratio = ($38,000 + $36,000 + $171,600)/ $287,600

Acid-Test Ratio = 0.85: 1

For every dollar of Current Liabilities the company needs to pay, it has $0.85 of Quick Assets to utilize.

Answer to Part 3.

Accounts Receivable Turnover = Sales/ Average Net Accounts Receivable

Average Net Accounts Receivable = ($171,600 + $149,600)/2

Average Net Accounts Receivable = $160,600

Accounts Receivable Turnover = $1,238,000/ $160,600

Accounts Receivable Turnover = 7.71 times

The company turns its Accounts Receivable an average of 7.71 times a year/ period.

Answer to Part 4.

Inventory Turnover = Cost of Goods sold/ Average Inventory

Average Inventory = ($182,000 + $135,400)/ 2 = $158,700

Inventory Turnover = $826,000/ $158,700

Inventory Turnover = 5.20 times

The company turns its inventory an average of 5.20 times a year/ period.

Answer to Part 5.

Profit Margin = Net Income/ Net Sales

Profit Margin = $155,000/ $1,238,000

Profit Margin = 12.52%