Question

Exercise 13-12 Sheffield Corp. experienced a fire on December 31, 2020, 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, 2020 Cash Accounts receivable (net) Inventory Accounts payable Notes payable Common stock, $100 par Retained earnings $ 39,100 75,100 207,800 52,800 31,300 408,400 117,800 December 31, 2019 $ 14,100 130,000 190,000 90,700 66,400 408,400 106,300 Additional information: 1. The inventory turnover is 5.7 times. 2. The return on common stockholders' equity is 23%. The company had no additional paid-in capital. 3. The receivables turnover is 11.6 times. 4. The return on assets is 19%. 5. Total assets at December 31, 2019, were $614,600. Compute the following for Sheffield Corp.. (Round all answers to 0 decimal places, e.g. 2,150.) (a) Cost of goods sold for 2020. $ (b) Net credit sales for 2020. $ (c) Net income for 2020. $ (d) Total assets at December 31, 2020. $

Answer 1

a) Cost of Goods Sold for 2020:

Average Inventory = (Opening Inventory + Closing Inventory)/2 = (207800+190000)/2 = $1,98,900

Inventory Turnover Ration = Cost of Goods Sold/Average Inventory

5.7 = Cost of Goods Sold/198900

Cost of Goods Sold = $ 11,33,730

b) Net Credit Sales for 2020:

Average Accounts Receivable = (Opening A/R + Closing A/R)/2 = (75100+130000)/2 = $ 1,02,550

Accounts Receivables Turnover Ratio = Net Credit Sales/Average Accounts Receivables

11.60 = Net Credit Sales/102550

Net Credit Sales = $ 11,89,580

c) Net Income for 2020:

Shareholders' Equity = Common Stock + Retained Earnings

Opening Shareholders' Equity = 408400+117800 = $ 5,26,200

Closing Shareholders' Equity = 408400+106300 = $ 5,14,700

Average Shareholders' Equity = (526200+514700)/2 = $ 5,20,450

Return on Common Shareholders' Equity = Net Income/Average Common Shareholders' Equity

23% = Net Income/520450

Net Income = $ 1,19,704

d) Total Assets as at December 31, 2020:

Return on Assets = Net Income/Average Total Assets

19% = 119704/Average Total Assets

Average Total Assets = 6,30,021

Opening Total Assets + Closing Total Assets = 2*630021 = 1260042

614600 + Closing Total Assets = 1260042

Closing Total Assets = Total Assets as at December 31, 2020 = $ 6,45,442