The financial statements for Castile Products, Inc., are given below:
Castile Products, Inc. Balance Sheet December 31 |
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Assets | ||||||
Current assets: | ||||||
Cash | $ | 20,000 | ||||
Accounts receivable, net | 240,000 | |||||
Merchandise inventory | 400,000 | |||||
Prepaid expenses | 8,000 | |||||
Total current assets | 668,000 | |||||
Property and equipment, net | 840,000 | |||||
Total assets | $ | 1,508,000 | ||||
Liabilities and Stockholders' Equity | ||||||
Liabilities: | ||||||
Current liabilities | $ | 300,000 | ||||
Bonds payable, 12% | 310,000 | |||||
Total liabilities | 610,000 | |||||
Stockholders’ equity: | ||||||
Common stock, $10 par value | $ | 180,000 | ||||
Retained earnings | 718,000 | |||||
Total stockholders’ equity | 898,000 | |||||
Total liabilities and stockholders’ equity | $ | 1,508,000 | ||||
Castile Products, Inc. Income Statement For the Year Ended December 31 |
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Sales | $ | 3,895,000 | |
Cost of goods sold | 1,500,000 | ||
Gross margin | 2,395,000 | ||
Selling and administrative expenses | 580,000 | ||
Net operating income | 1,815,000 | ||
Interest expense | 37,200 | ||
Net income before taxes | 1,777,800 | ||
Income taxes (30%) | 533,340 | ||
Net income | $ | 1,244,460 | |
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $350,000. All sales were on account.
Required:
Compute the following financial data and ratios:
1. Working capital.
2. Current ratio. (Round your answer to 1 decimal place.)
3. Acid-test ratio. (Round your answer to 2 decimal places.)
4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
5. Times interest earned ratio. (Round your answer to 2 decimal places.)
6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)
The financial statements for Castile Products, Inc., are given below:
Castile Products, Inc. Balance Sheet December 31 |
||||||
Assets | ||||||
Current assets: | ||||||
Cash | $ | 20,000 | ||||
Accounts receivable, net | 240,000 | |||||
Merchandise inventory | 400,000 | |||||
Prepaid expenses | 8,000 | |||||
Total current assets | 668,000 | |||||
Property and equipment, net | 840,000 | |||||
Total assets | $ | 1,508,000 | ||||
Liabilities and Stockholders' Equity | ||||||
Liabilities: | ||||||
Current liabilities | $ | 300,000 | ||||
Bonds payable, 12% | 310,000 | |||||
Total liabilities | 610,000 | |||||
Stockholders’ equity: | ||||||
Common stock, $10 par value | $ | 180,000 | ||||
Retained earnings | 718,000 | |||||
Total stockholders’ equity | 898,000 | |||||
Total liabilities and stockholders’ equity | $ | 1,508,000 | ||||
Castile Products, Inc. Income Statement For the Year Ended December 31 |
|||
Sales | $ | 3,895,000 | |
Cost of goods sold | 1,500,000 | ||
Gross margin | 2,395,000 | ||
Selling and administrative expenses | 580,000 | ||
Net operating income | 1,815,000 | ||
Interest expense | 37,200 | ||
Net income before taxes | 1,777,800 | ||
Income taxes (30%) | 533,340 | ||
Net income | $ | 1,244,460 | |
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $350,000. All sales were on account.
Required:
Compute the following financial data and ratios:
1. Working capital.
2. Current ratio. (Round your answer to 1 decimal place.)
3. Acid-test ratio. (Round your answer to 2 decimal places.)
4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
5. Times interest earned ratio. (Round your answer to 2 decimal places.)
6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)
Ans. 1 | Working capital = Total current assets - Total current liabilities | ||
$668,000 - $300,000 | |||
$368,000 | |||
Ans. 2 | Current ratio = Total current assets / Total current liabilities | ||
$668,000 / $300,000 | |||
2.2 : 1 | |||
Ans. 3 | Acid test ratio = (Total current assets - Inventory - Prepaid expenses) / Total current liabilities | ||
($668,000 - $400,000 - $8,000) / $300,000 | |||
$260,000 / $300,000 | |||
0.87 : 1 | |||
Ans. 4 | Debt to equity ratio = Total liabilities / Total stockholder's equity | ||
$610,000 / $898,000 | |||
0.68 | |||
Ans. 5 | Time interest earned = Net operating income / Interest expenses | ||
$1,815,000 / $37,200 | |||
48.79 times | |||
Ans. 6 | Average collection period = No. of days in year / Net credit sales * Average accounts receivables | ||
365 / $3,895,000 * $205,000 | |||
19.2 | days | ||
*Average receivable = (Beginning receivables + Ending receivables) / 2 | |||
($170,000 + $240,000) / 2 | |||
$205,000 | |||
Ans. 7 | Average sales period = No. of days in year / Cost of goods sold * Average inventory | ||
365 / $1,500,000 * $375,000 | |||
91.3 | days | ||
*Average inventory = (Beginning inventory + Ending inventory) / 2 | |||
($350,000 + $400,000) / 2 | |||
$375,000 | |||
Ans. 8 | Operating cycle = Average collection period + Average sales period | ||
19.2 + 91.3 | |||
110.5 days | |||
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 20,000 Accounts receivable, net 220,000 Merchandise inventory 320,000 Prepaid expenses 11,000 Total current assets 571,000 Property and equipment, net 880,000 Total assets $ 1,451,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 290,000 Bonds payable, 10% 400,000 Total liabilities 690,000 Stockholders’ equity: Common stock, $10 par value $ 150,000 Retained earnings 611,000 Total stockholders’ equity 761,000 Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 23,000 Accounts receivable, net 160,000 Merchandise inventory 340,000 Prepaid expenses 8,000 Total current assets 531,000 Property and equipment, net 880,000 Total assets $ 1,411,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 250,000 Bonds payable, 8% 320,000 Total liabilities 570,000 Stockholders’ equity: Common stock, $5 par value $ 170,000 Retained earnings 671,000 Total stockholders’ equity 841,000 Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance sheet December 31 Assets Current assets: Cash 19,000 Accounts receivable, net 240,000 Merchandise inventory 370,000 Prepaid expenses 8,000 Total current assets 637,000 Property and equipment, net 850,000 Total assets $1,487,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 220,000 Bonds payable, 10% 380,000 Total liabilities 600,000 Stockholders' equity: Common stock, $10 per value $ 180,000 Retained earnings 707,000 Total stockholders' equity 887,000 Total liabilities and stockholders'...
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The financial statements for Castile Products, Inc., are given below Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses 21,000 240,000 320,000 7,000 Total current assets 588,000 910,000 Property and equipment, net Total assets $1,498,000 Liabilities and Stockhoiders' Equity Liabilities: Current liabilities Bonds payable, 10% $ 240,000 390,000 . Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings 630,000 ole $ 180,000 688,000 Total stockholders' equity 868,000 Total liabilities...
The financial statements for Castile Products, Inc., are given below Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash $ 21,000 260,000 360,000 8,000 Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets 649,000 820,000 Property and equipment, net Total assets $1,469,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities $300,000 350,000 Bonds payable, 11% Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings 650,000 $110,000 709,000 Total stockholders' equity 819,000 Total liabilities and equity $1,469,000...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets Property and equipment, net $ Accounts 23,000 190,000 400,000 8,000 621,000 890,000 890,000 Total assets $1,511,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 12% $ 210,000 370,000 Total liabilities Stockholders' equity Common stock, $5 par value Retained earnings 580,000 $ 130,000 801,000 Total stockholders' equity Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 21,000 260,000 350,000 8,000 Total current assets Property and equipment, net 639,000 890,000 $1,529,000 Total assets Liabilities and Stockholders' Equity Liabilities $ 230,000 Current liabilities Bonds payable, 12% 320,000 550,000 $ 200,000 Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings 779,000 979,000 $1,529,000 Total stockholders' equity Total liabilities...
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The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Total current assets Property and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 12% Total liabilities Stockholders' equity: Common stock, $5 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 19,000 200,000 300,000 12,000 531,000 900,000 $1,431,000 $ 250,000 330,000...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets: Cash Accounts receivable, net Merchandise inventory Prepaid expenses $ 21,000 220,000 300,000 11,000 Total current assets Property and equipment, net 552,000 900,000 Total assets $1,452,000 Liabilities and Stockholders' Equity Liabilities: Current liabilities Bonds payable, 9% $ 230,000 350,000 580,000 Total liabilities Stockholders' equity: Common stock, $10 par value Retained earnings e $ 110,000 762,000 Total stockholders' equity Total liabilities and...