Question

Presented here are the comparative balance sheets of Hames Inc. at December 31, 2020 and 2019. Sales for the year ended December 31, 2020, totaled $650,000. HAMES INC. Balance Sheets December 31, 2020 and 2019 2020 2019 $ 19,000 78,000 103,000 $ 200,000 50,000 125,000 (65,000) $ 310,000 $ 20,000 72,000 99,000 $191,000 40,000 110,000 (60,000) $ 281,000 Assets Cash Accounts receivable Merchandise inventory Total current assets Land Plant and equipment Less: Accumulated depreciation Total assets Liabilities Short-term debt Accounts payable Other accrued liabilities Total current liabilities Long-term debt Total liabilities Stockholders' Equity Common stock, no par, 100,000 shares authorized $ 18,000 64,000 20,000 $ 102,000 22,000 $ 124,000 $ 17,000 75,500 18,000 $ 110,500 30,000 $ 140,500

Answer 1

a) ROI:	2020
Net Income (a)	$50,500
Total Assets (b)	$310,000
ROI (a/b*100)	16.29%
b) ROE:	2020
Net Income (a)	$50,500
Total Stockholders' Equity (b)	$186,000
ROE (a/b*100)	27.2%
c) Working capital:	2020
Total Current Assets (a)	$200,000
Total Current Liabilities (b)	$102,000
Working capital (a - b)	$98,000
d) Current ratio:
Total Current Assets (a)	$200,000
Total Current Liabilities (b)	$102,000
Current ratio (a/b)	1.96
e) Acid test ratio:
Cash	$19,000
Accounts receivable	$78,000
Total Quick Assets (a)	$97,000
Total Current Liabilities (b)	$102,000
Acid test ratio (a/b)	0.95
f)
ROI:	2020
Net Income (a)	$50,500
Total Assets (b) ($310,000 - $15,000)	$295,000
ROI (a/b*100)	17.12%
It has increased because the decrease of $15,000 in cash decreases the total assets.
ROE:	2020
Net Income (a)	$50,500
Total Stockholders' Equity (b)	$186,000
ROE (a/b*100)	27.2%
It has no effect due to paying to accounts payable.
c) Working capital:	2020
Total Current Assets (a) ($200,000 - $15,000)	$185,000
Total Current Liabilities (b) ($102,000 - $15,000)	$87,000
Working capital (a - b)	$98,000
It has no effect because there is a decrease in current assets and in current liabilities by same $15,000.
d) Current ratio:
Total Current Assets (a) ($200,000 - $15,000)	$185,000
Total Current Liabilities (b) ($102,000 - $15,000)	$87,000
Current ratio (a/b)	2.13
It has increased from 1.96 to 2.13 due to decrease of cash in current assets and decrease of accounts payable in current liabilities.
e) Acid test ratio:
Cash ($19,000 - $15,000)	$4,000
Accounts receivable	$78,000
Total Quick Assets (a)	$82,000
Total Current Liabilities (b) ($102,000 - $15,000)	$87,000
Acid test ratio (a/b)	0.94
It has decreased from 0.95 to 0.94 due to decrease of cash in current assets and decrease of accounts payable in current liabilities by same $15,000.
g)
ROI:	2020
Net Income (a)	$50,500
Total Assets (b) ($310,000 + $15,000 - $15,000)	$310,000
ROI (a/b*100)	16.29%
No effect because same amount of $15,000 is increased through cash in current assets and decreased through accounts receivable in current assets.
b) ROE:	2020
Net Income (a)	$50,500
Total Stockholders' Equity (b)	$186,000
ROE (a/b*100)	27.2%
It has no effect due to collection of accounts receivable.
c) Working capital:	2020
Total Current Assets (a) ($200,000 + $15,000 - $15,000)	$200,000
Total Current Liabilities (b)	$102,000
Working capital (a - b)	$98,000
No effect because same amount of $15,000 is increased through cash in current assets and decreased through accounts receivable in current assets.
d) Current ratio:
Total Current Assets (a) ($200,000 + $15,000 - $15,000)	$200,000
Total Current Liabilities (b)	$102,000
Current ratio (a/b)	1.96
No effect because same amount of $15,000 is increased through cash in current assets and decreased through accounts receivable in current assets.
e) Acid test ratio:
Cash ($19,000 + $15,000)	$34,000
Accounts receivable ($78,000 - $15,000)	$63,000
Total Quick Assets (a)	$97,000
Total Current Liabilities (b)	$102,000
Acid test ratio (a/b)	0.95
No effect because same amount of $15,000 is increased through cash in current assets and decreased through accounts receivable in current assets.