Lingenfelter Corporation experienced a fire on December 31, 2017, in which its financial records were partially...

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Lingenfelter Corporation experienced a fire on December 31, 2017, 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, 2017	December 31, 2016
Cash	$ 30,000	$ 16,000
Accounts receivable (net)	74,500	130,000
Inventory	195,000	176,000
Accounts payable	45,000	91,000
Notes payable	28,000	61,000
Common stock, $100 par	401,000	401,000
Retained earnings	120,000	106,500

Additional information:

1.		The inventory turnover is 3.0 times.
2.		The return on common stockholders’ equity is 29%. The company had no additional paid-in capital.
3.		The accounts receivable turnover is 7.7 times.
4.		The return on assets is 12.5%.
5.		Total assets at December 31, 2016, were $598,000.

Compute the following for Lingenfelter Corporation. (a) Cost of goods sold for 2017 556500 (b) Net sales (credit) for 2017 78

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Answer 1

Answer #1

a]	Cost of goods sold = 3Average inventory = 3(195000+176000)/2 =	$ 5,56,500.00
b]	Net sales [credit] = 7.7Average AR = 7.7(74500+130000)/2 =	$ 7,87,325.00
c]	Net income = 29%Average equity = 29%(401000+401000+120000+106500)/2 =	$ 1,49,132.50
d]	ROA = NI/Average assets
	Substituting available values in the above equation
	0.125 = 149132.5/((598000+x)/2), where x = the total
	Solving for x,
	0.125/2 = 149132.5/(598000+x)
	x = 149132.2*2/0.125-598000 =	$ 17,88,115.20
	VERIFICATION:
	ROA = 149132.5/((598000+1788115.20)/2))	12.50%

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Answer 2

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