Question

Category Prior Year Current Year Accounts payable ??? 222 Accounts receivable 320,715 397,400 Accruals 40,500 33,750 Additional paid in capital 500,000 541,650 Cash 17,500 47,500 Common Stock 94,000 105,000 COGS 328,500 429,836.00 current portion long-term debt 33,750 B Depreciation expense 35,000 54,198.00 42,416.00 288,000 54,000 40,500 279,000 Interest expense Inventories Long-term debt 335,739.00 401,415.00 Net fixed assets 946,535 999,000 Notes payable 148,500 162,000 Operating expenses (excl. depr.) 126,000 161,851.00 Retained earnings 306,000342,000 Sales 639,000 851,304.00 MAH Taxes WON 24,750 47,125.00

1. What is the entry for the current year's taxes on a common-sized income statement?

2.What is the current year's accounts payable balance?

3.What is the current year's Return on Assets (ROA)?

4.What is the current year's Return on Equity (ROE)?

5.What is the current year's entry for long-term debt on a common sized balance sheet?

Answer 1

1). In a common-sized income statement, all the components are represented as a percentage of Sales.

So, entry of current year's taxes on common-sized income statement = taxes/sales = 47125/851304 = 5.54%

2). Current year's account payable can be calculated by subtracting all other liabilities and equity from the total assets

Total assets = Cash + Accounts receivable + inventories + net fixed assets = 47500+397400+288000+999000 = $1731900

Total equity = common stocks + retained earning + paid up capital = 105000+342000+541650 = $988650

Total liabilities = Accounts payable + Accruals + current portion of long-term debt + notes payable + long-term debt

Total liabilities = Accounts payable + 33750+35000+162000+401415 = Account payable + $632165

Equating the basic account equation

Total assets = Total liabilities + Total equity

1731900 = Accounts payable + 632165 + 988650 => Accounts payable = $111085

3). To calculate Return on Assets, we need net income

So, Net income = Sales - COGS - operating exp - depreciation - interest exp - taxes

NI = 851304-429836-161851-54198-42416-47125 = $115878

We know that ROA = NI/total assets

ROA = 115878/1731900 = 6.69%

4). ROE = NI/total equity

ROE = 115878/988650 = 11.72%

5).  In a common-sized balance sheet, all the component of balance sheet are expressed as a percentage of Total assets.

So, current year's entry for long-term debt on a common sized balance sheet = Long-term debt/total assets = 401415/1731900 = 23.18%