Question

Income statements and balance sheets data for Virtual Gaming Systems are provided below. VIRTUAL GAMING SYSTEMS Income Statements For the years ended December 31 2022 2021 Net sales $3,500,000 $3,026,000 Cost of goods sold 2,478,000 1,948,000 Gross profit 1,022,000 1,078,000 Expenses: Operating expenses 953,000 856,000 Depreciation expense 28,000 26,000 Loss on sale of land 7,800 Interest expense 17,000 14,000 Income tax expense 7,800 47,000 Total expenses 1,005,800 950,800 Net income $ 16,200 127,200 VIRTUAL GAMING SYSTEMS Balance Sheets December 31 2022 2021 2020 $ Assets Current assets: Cash Accounts receivable Inventory Prepaid rent Long-term assets: Investment in bonds Land Equipment 200,000 74,000 124,000 13,800 $184,000 79,000 103,000 11,800 $142,000 58,000 133,000 5,760 103,000 103,000 0 298,000 268,000 208,000

Answer 1

Receivables turnover ratio = Net sales / Average Accounts receivable

2021 = $3,026,000 / [($58,000 + $79,000)/2]

= 44.2 times

2022 = $3,500,000 / [($79,000+$74,000)/2]

= 45.8 times

Inventory turnover ratio = Cost of goods sold / Average inventory

2021 = $1,948,000 / [$133,000+$103,000)/2]

= 16.5 times

2022 = $2,478,000 / [($103,000+$124,000)/2]

= 21.8 times

Current ratio = Current assets / Current liabilities

= (Cash + Accounts receivable + Inventory + Prepaid rent) / (Accounts payable + Interest payable + Income tax payable)

2021 = ($184,000 + $79,000 + $103,000 + $11,800) / ($64,000 + $5,600 + $14,000)

= $377,800 / $83,600

= 4.5 to 1

2022 = ($200,000 + $74,000 + $124,000 + $13,800) / ($203,400 + $8,400 + $11,800)

= $411,800 / $223,600

= 1.8 to 1

Debt to equity ratio = Debt / Equity

= (Total liabilities and stockholders equity - Stockholders equity) / Stockholders equity

2021 = ($890,800 - $298,000 - $226,200) / ($298,000 + $226,200)

= $366,600 / $524,200

= 69.9%

2022 = ($1,016,800 - $298,000 - $115,200) / ($298,000 + $115,200)

= $603,600 / $413,200

= 146.1%