Question

Panza Corporation experienced a fire on December 31, 2020, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances. December 31, 2020 December 31, 2019 Cash $ 26,500 $ 11,000 Accounts receivable (net) 77,500 123,500 Inventory 199,000 186,000 Accounts payable 52,000 93,000 Notes payable 28,500 64,000 Common stock, $100 par 388,000 388,000 Retained earnings 111,000 108,500 Additional information:

1. The inventory turnover is 3.7 times.

2. The return on common stockholders’ equity is 26%. The company had no additional paid-in capital.

3. The accounts receivable turnover is 7.8 times.

4. The return on assets is 12.5%.

5. Total assets at December 31, 2019, were $591,000.

Compute the following for Panza Corporation.

(a) Cost of goods sold for 2020 $Entry field with correct answer 712250.00

(b) Net credit sales for 2020. $Entry field with correct answer 783900.00

(c) Net income for 2020 $Entry field with correct answer 129415.00

(d) Total assets at December 31, 2020 Entry field with incorrect answer now contains modified data 3550280.00

Answer 1

Answer of Part a:

Average Inventory = (Beginning Inventory + Ending Inventory) /2
Average Inventory = ($186,000 + $199,000) /2
Average Inventory = $192,500

Inventory Turnover = Cost of Goods Sold / Average Inventory
3.7 = Cost of Goods Sold / $192,500
Cost of Goods Sold = 3.7 * $192,500
Cost of Goods Sold = $712,250

Answer of Part b:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) /2
Average Accounts Receivable = ($123,500 + $77,500) /2
Average Accounts Receivable = $100,500

Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable
7.8 = Credit Sales / $100,500
Credit Sales = 7.8 * $100,500
Credit Sales = $783,900

Answer of Part c:

Average Common Stockholders = (Beginning Common Stockholder + Ending Common Stockholders) /2
Average Common Stockholders = [($388,000 + $108,500) + ($388,000 + $111,000)] /2
Average Common Stockholders = [$496,500 + $499,000] / 2
Average Common Stockholders = $497,750

Return on Common Stockholders = Net Income / Average Common Stockholders
0.26 = Net Income / $497,750
Net Income = 0.26 * $497,750
Net Income = $129,415

Answer of Part d:

Return on Assets = Net Income / Average Total Assets
0.125 = $129,415 / Average Total Assets
Average Total Assets = $129,415 / 0.125
Average Total Assets = $1,035,320

Average Total Assets = (Beginning Total Assets + Ending Total Assets) /2
$1,035,320 = ($591,000 + Ending Total Assets) /2
$1,035,320 * 2 = $591,000 + Ending Total Assets
$2,070,640 = $591,000 + Ending Total Assets
Ending Total Assets = $2,070,640 - $591,000
Ending Total Assets = $1,479,640