Following is a comparative balance sheet for Summer Days Corporation:
Summer Days Corporation
Comparative Balance Sheet
December 31, 2019 and 2018
20192018
Current assets:
Cash$ 150,000$ 90,000
Short-term investments90,00080,000
Accounts receivable, net350,000220,000
Inventory400,000430,000
Prepaid expenses30,00030,000
Total current assets$1,020,000$ 850,000
Property, plant, and equipment, net750,000500,000
Other assets280,000300,000
Total assets$2,050,000$1,650,000
Current liabilities:
Short-term notes payable$650,000$670,000
Accounts payable200,000225,000
Total current liabilities$850,000$895,000
Non-current debt180,000220,000
Total liabilities$1,030,000$1,115,000
Shareholders' equity:
Common shares$500,000$500,000
Retained earnings410,00035,000
Total shareholders' equity$ 910,000$535,000
Total liabilities and shareholders' equity$2,140,000$1,650,000
Notes: Net sales (all on credit) and cost of goods sold for the year ended December 31, 2019, were $2,100,000 and $1,500,000, respectively. The number of common shares outstanding has been 50,000 since the company began operations.
Required:
Calculate the following ratios for the year ended December 31, 2019:
a. current ratio
b. acid-test ratio
c. inventory turnover
d. accounts receivable turnover
e. debt ratio
f. book value per common share of stock
Ans. A | Current ratio = Total current assets / Total current liabilities | |||
$1,020,000 / $850,000 | ||||
1.20 : 1 | ||||
Ans. B | Acid test ratio = (Cash + Short term investments + Accounts receivable) / Total current liabilities | |||
($150,000 + $90,000 + $350,000) / $850,000 | ||||
$590,000 / $850,000 | ||||
0.69 : 1 | ||||
*Inventory and prepaid expenses are not the liquid assets so these are not included | ||||
in the calculation of acid test ratio. | ||||
Ans. C | Inventory turnover = Cost of goods sold / Average Inventory | |||
$1,500,000 / $415,000 | ||||
3.61 | times | |||
*Average inventory = (Beginning inventory + Ending inventory) / 2 | ||||
($430,000 + $400,000) / 2 | ||||
$415,000 | ||||
Ans. D | Accounts receivable turnover = Net credit sales / Average receivables | |||
$2,100,000 / $285,000 | ||||
7.37 times | ||||
*Average receivable = (Beginning receivables + Ending receivables) / 2 | ||||
($220,000 + $350,000) / 2 | ||||
$285,000 | ||||
Ans. E | Debt ratio = Total liabilities / Total assets * 100 | |||
$1,030,000 / $2,140,000 * 100 | ||||
48.13% | ||||
Ans. F | Book value per share = Total common stockholder's equity / no. of shares outstanding | |||
$910,000 / 50,000 | ||||
$18.20 | per share | |||
Following is a comparative balance sheet for Summer Days Corporation: Summer Days Corporation Comparative Balance Sheet...
Unit 10 - Financial Statement Analysis Following is a comparative balance sheet for Summer Days Corporation: Summer Days Corporation Comparative Balance Sheet December 31, 2019 and 2018 2019 2018 Current assets: Cash $ 150,000 $ 90,000 Short-term investments 90,000 80,000 Accounts receivable, net 350,000 220,000 Inventory 400,000 430,000 Prepaid expenses 30,000 30,000 Total current assets $1,020,000 $ 850,000 Property, plant, and equipment, net 750,000 500,000 Other assets 280,000 300,000 Total assets $2,050,000 $1,650,000 Current liabilities: Short-term notes payable $650,000 $670,000...
Unit 10 - Financial Statement Analysis Following is a comparative balance sheet for Summer Days Corporation: Summer Days Corporation Comparative Balance Sheet December 31, 2019 and 2018 2019 2018 Current assets: Cash $ 140,000 $ 90,000 Short-term investments 90,000 80,000 Accounts receivable, net 350,000 220,000 Inventory 500,000 430,000 Prepaid expenses 30,000 30,000 Total current assets $1,110,000 $ 850,000 Property, plant, and equipment, net 750,000 500,000 Other assets 280,000 300,000 Total assets $2,140,000 $1,650,000 Current liabilities:...
Unit 10 - Financial Statement Analysis Following is a comparative balance sheet for Summer Days Corporation: Summer Days Corporation Comparative Balance Sheet December 31, 2019 and 2018 20192018 Current assets: Cash$ 140,000$ 90,000 Short-term investments90,00080,000 Accounts receivable, net350,000220,000 Inventory500,000430,000 Prepaid expenses30,00030 000 Total current assets$1,110,000$ 850,000 Property, plant, and equipment, net750,000500,000 Other assets280.000300,000 Total assets $2.140,000$1,650,000 Current liabilities: Short-term notes payable$650,000$670,000 Accounts payable200,000225,000 Total current liabilities $850,000$895,000 Non-current debt380,000220,000 Total liabilities$1,230,000$1,115,000 Shareholders' equity. Common shares $500,000$500,000 Retained earnings 10,00035,000 Total...
Summer Days Corporation Comparative Balance Sheet December 31, 2019 and 2018 20192018 Current assets: Cash$ 140,000$ 90,000 Short-term investments90,00080,000 Accounts receivable, net350,000220,000 Inventory500,000430,000 Prepaid expenses 30,00030,000 Total current assets$1,110,000$ 850,000 Property, plant, and equipment, net750,000500,000 Other assets 280,000300,000 Total assets$2,140,000$1,650,000 Current liabilities: Short-term notes payable$650,000$670,000 Accounts payable200,000225,000 Total current liabilities$850,000$895,000 Non-current debt380,000220,000 Total liabilities$1,230,000$1,115,000 Shareholders' equity: Common shares $500,000$500,000 Retained earnings410,00035,000 I Total shareholders' equity$ 910,000$535,000 Total liabilities and shareholders' equity$2,140,000$1,650,000 Notes: Net sales (all on credit) and cost of...
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