Question

Ch 04: End-of-Chapter Problems - Analysis of Financial Statements Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.3x Days sales outstanding: 36.5 daysa Inventory turnover ratio: 4x Fixed assets turnover: 3x Current ratio: 2x Gross profit margin on sales: (Sales - Cost of goods sold)/Sales = 35% aCalculation is based on a 365-day year. Do not round intermediate calculations. Round your answer to the nearest cent. Balance Sheet Cash Current liabilities Accounts receivable Long-term debt 75,000 Inventories Common stock Fixed assets Retained earnings 75,000 Total assets $300,000 Total liabilities and equity $ Sales Cost of goods sold

Answer 1

Total asset turnover :

= Sales/ total asset

So, as the total asset turnover is 1.3 x and the total assets is $3,00,000

So, the sales is $3,90,000

Now, as the gross profit margin is 25%,which implies that the COGS is 75% * sales

So, COGS = 75 % * $3,90,000

=$2,92,500

Now, let us calculate the level of inventories,

Inventory turnover ratio = COGS/ INVENTORY

$2,92,500 / INVENTORY = 4

So, the level of inventory is ,

= $73,125

Now, let us calculate the level of fixed assets,

Sales/ fixed assets = 3

So, the level of fixed assets = $1,30,000

Now, let us calculate the accounts receivables,

accounts receivables/ sales * 365 = days sales outstanding

So, AR / $3,90,000 * 365 = 36.5

Accounts receivables = $39,000

The current assets = total assets - fixed assets

= $3,00,000 - $1,30,000

= $1,70,000

So, the level of cash can be calculated as,

Current assets = cash + accounts receivables + inventory

So, cash is 1,70,000 - 39,000 - $73,125

= $57,875

As the current ratio is 2,

So,

CA/ CL = 2
So, the current liabilities = $1,70,000/2

= $85,000

Now as the assets and liabilities side should be equal ,the asset side is $3,00,000

So, the total liabilities + equity = $3,00,000

current liability + long term debt + common stock + retained earnings = $3,00,000

$85,000 + $75,000 + common stock + $75,000 = $3,00,000

So, the common stock is = $65,000