Question

The following income statement and balance sheets for Virtual Gaming Systems are provided. VIRTUAL GAMING SYSTEMS Income Statement For the year ended December 31, 2021 Net sales $3,046,000 Cost of goods sold 1,952,000 Gross profit 1,094,000 Expenses: Operating expenses $860,000 Depreciation expense 28,000 Loss on sale of land 8,200 Interest expense 16,000 Income tax expense 50,000 Total expenses 962,200 Net income $ 131,800 VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2021 2020 $ 188,000 83,000 107,000 12,200 $146,000 62,000 137,000 6,240 107,000 212,000 272,000 (72,000) $909,200 242,000 212,000 (44,000) $761,240 Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investment in bonds Land Equipment Less: Accumulated depreciation Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Interest payable Income tax payable Long-term liabilities: Notes payable Stockholders' equity: Common stock Retained earnings Total liabilities and stockholders' equity $ 68,000 6,400 16,000 $ 83,000 3,200 14,200 287,000 227,000 302,000 229,800 $909,200 302,000 131,840 $761,240

Answer 1

Answer: I Receivables Turn over ratio 42 times 2 Average collection period 8.7 days | 3. Inventory turn over ratio 16 times 4 Average Days in inventory 22.8 days 5. Current Ratio 4.3 to I G. Acid Test Ratio 219 to 1 7 pebt equity Ratio 799 % 8 Times interest earned Ratio 12-4 times Working Noty 10) Receivables Tum over Ratio - Net credit sales Average Accounts Receivably Average Accounts Receivably slopening receivably telding Receivably yz = (62000+83000)/2 =$72,500 Receivabley turn over Ratio $3,046,000/72500 = 42 times 12) Average Collection period Average Accounty reelivably x 365 Days Net credit sales {$72,500 $3046,000) x 365 days = 8.7 Days 3) Inventory turn over Ralio = cost of goody sold /Average Inventory Average inventory - Opening inventory telding inventory)/2 =(137,000 +107000) = $122,000 Inventory turn over valio $1952000/$ 122,000 = 16 times 14 Average days in Inventory - Average Inventory/sost of gody sold A365 = 122,000/1952900 X365 day = 22.8 days

15) Current natio = Current assets / Current liabilities Current astery = 188000+83000 + 107000 +12900 =$390200 Current liability = 68000 +6,400 +1680090400 Current ratio = 390,200/90,400 = 4.3 (6) Acid test ratio = Alid Assets) current liability Acid Assets or quick Asset = Current Assety - Inventory - prepaid expenses - 3901200-107,000-12,200 = $271000 Heid test ratio=271000/90.400 = 2.9 (7) Debt to equity Ratio - Total liabilities/Total stockholders equila Total liability = 68000 16400+16000 + 287,000 = 377,400 Total stockholders quity = 302.000 +299800 : 531800 Debt to equity Ratio - 377,400/531,800 = 70.9% (8) Time interest earned ratio & Earnings before interest and care Interest expensed =(131.800 + 16000 + 30000) 16000 = 12.4 time