Question

can you please solve and state what variables you used for each equation? thank you

1 Acct No. Name 2 1010 Cash 3 1030 Accounts Receivable 4 1035 Allowance for Bad Debt 5 1050 Inventory 6 1700 Fixed Assets 7 1750 Accumulated Depreciation 8 2010 Accounts Payable 9 2030 Payroll W/H&Taxes Payable 10 2070 Interest Payable 11 2080 Income Tax Payable 12 2700 Long-term Notes Payable 13 3900 Capital Stock 14 3999 Retained Earnings 15 4010 Sales 16 4020 Sales Returns 17 4030 Sales Discounts 18 5000 Purchases 19 5010 Purchase Returns 20 5020 Purchase Discounts 21 5999 Cost of Goods Sold 22 6000 Wage & Salary Expense 23 6010 Rent Expense 24 6020 Utilities Expense 25 6030 Office Supplies Expense 26 6040 Payroll Tax Expense 27 6050 Depreciation 28 6060 Bad Debt Expense 29 6070 Interest Expense 30 6080 Provision for Income Tax YTD 174535.7 582380 -61488.3 1733000 917500 -39202 -630000 -9527.95 -5000 -236949 -600000 -700000 -177453 -6174020 320280 59910 0 0 0 4205114 70878 122650 72820 35800 27135.25 11750 57938.3 5000 236948.9 24

Answer 1

Hi there,

Here is my answer to the given question:

1) Return on Investment= Net Income/Average Owners Equity

Computation of Net Income:

	Statement of Profit and Loss
	Particulars	Amount	Amount
	Sales	61,74,020.00
	Less :Sales Return	-3,20,280.00
	(A) Net Sales		58,53,740.00
	Less: Direct Expenses
	(B) Cost of Goods Sold		42,05,114.00
	(C ) Gross Margin= (A)-(B)		16,48,626.00
	Less: Indirect Expenses
1	Wages and Salary Expense	70,878.00
2	Rent Expense	1,22,650.00
3	Utilities expense	72,280.00
4	Office Supplies Expense	35,800.00
5	Payroll Tax Expense	27,135.25
6	Depreciation	11,750.00
7	Bad Debt Expense	57,938.30
8	Interest Expense	5,000.00
9	Provision for Income Tax	2,36,948.90
	(D) Total Indirect Expenses		6,40,380.45
	(E ) Net Income (D)-( E)		10,08,245.55

Return on Investment ROI = 10,08,245.55/7,00,000

= 144.04 %

2) Gross Margin Ratio GM% = Gross Margin/Net Sales

= 16,48,626/58,53,740

= 28.16 % (Refer Table above)

3) Current Assets Ratio CR = Current Assets / Current Ratio

Current Assets = Cash + Assets Receivable - Allowance for Bad Debts + Inventory

= 174535.7+582380-61488.3+1733000

= 24,28,427

Current Liabilities = Accounts Payable + Payroll WH & Taxes Payable+ Interest Payable + Income Tax Payable

=630000+9527.95+5000+236949

= 8,81,476.95

Current Assets Ratio= Current Assets/ Current Liabilities

= 2428427/881476.95

= 2.75 times

4) Debt to Equity DE = Total Liabilities/ Owners Equity

Total Liabilities = Long term loans payable +Accounts Payable + Payroll WH & Taxes Payable+ Interest Payable + Income Tax Payable

=600000+630000+9527.95+5000+236949

= 14,81,476.95

Owners Equity = Capital Stock + Retained Earnings

= 700000+177453

= 8,77,453

Debt to Equity Ratio = 1481476.95/877453

= 168.84 %