Question

Interest expense A. Use the following information for questions Cash $ 90,000 Inventory 1110,000 Sales (all on credit) $ 12,000,000 Net plant and equipment 2400,000 Marketable securities 150,000 Selling and administrative expense* 1350,000 150,000 Liabilities and Stockholders' Equity Accounts payable $ 150,000 Notes payable 750,000 Retained earnings 1800,000 Cost of goods sold 9,000,000 Accounts receivable 1050,000 Long-term liabilities 900,000 Taxes 300,000 Extraordinary loss 600,000 Common stock 1200,000 B- Rama company is financing a new truck with a loan now of $30,000, to be repaid in 5 annual end-of-year installments of $7513.68. What annual interest rate is the company paying? (5 MARKs) C- Ahmed would like to purchase a home in five (10) years. The individual will accumulate enough money for a $40,000 down payment by making equal monthly payments to an account that is expected to earn 12% annual interest compounded monthly. How much are the equal monthly payments? (5 MARKS) From the information above please: 1- Prepare the Balance sheet (7.5 MARKES) 2- Prepare the Income statement) (7.5 MARKES) 3-Calculate the following ratios and what these ratios masseurs? (13 MARKS) Selling and administrative expense*Includes $150,000 in lease payments A, Profitability ratios C. Liquidity ratios.: 9. Current ratio: evaluate 1. Profit margin: 2. Return on assets investment) 3. Return on equity: B. Asset utilization ratios: 10. Quick ratio D. Debt utilization ratios 4. Receivable turnover: 11. Debt to total assets: 12. Times interest earned 5. Average collection perioda 6. Inventory turnover: 13. Fixed charge coverage 7. Fixed asset turnover: 8. Total asset turnover:

Principles of finance 1
Please in a good text

Answer 1

Trial Balance
Particulars	Debit	Credit
Cash	90000
Sales		12000000
Marketable Securities	150000
Interest Expense	150000
Accounts Payable		150000
Retained Earnings		1800000
Accounts Receivable	1050000
Taxes	300000
Inventory	1110000
Plant and Equipment	2400000
Selling and Administrative Expenses	1350000
Notes Payable		750000
COGS	9000000
Long term Liabilities		900000
Extraordinary Loss	600000
Common Stock		1200000
Total	16200000	16800000

Since the Trial balance itself not tallying, Balance Sheet also won't tally.

Adjustment Entry:

Long Term Liabilities A/c Debit 1,50,000

Selling and Adminstration Expenses A/c Credit 1,50,000.

It's assumed that the lease liability is inside the Long term liabilites account and upon payment the same got reduced.

Income Statement
Particulars	Amount (in $)
Sales	12000000
Less: Cost of Goods Sold	9000000
Operating Income	3000000
Less: Interest Expenses	150000
Less: Selling and Administrative Expenses*	1200000
Net Profit Before Tax and Extraordinary Items	1650000
Less: Extraordinary Loss	600000
Net Profit Before Tax	1050000
Less: Tax	300000
Net profit after Tax	750000

Balance sheet
Liabilities	Amount (in $)	Assets	Amount (in$)
Common Stock	1200000	Cash	90000
Add: Profit	750000	Marketable Securities	150000
Retained Earnings	1800000	Accounts Receivable	1050000
Total Equity	3750000	Inventories	1110000
Notes Payable	750000	Plant and Equipment	2400000
Accounts Payable	150000
Long term liabilities	750000
	5400000		4800000

The difference in Balance sheet is the same as the difference in Trial Balance.

Ratios:

Profitability (PAT[not considering Etxraordinary Loss]/Sales)

=1350000/12000000 * 100 = 11.25%

Return on Assets (PAT[not considering Etxraordinary Loss]/Total Assets)

=1350000/4800000 * 100 = 28.125%

Return on Equity (PAT[not considering Etxraordinary Loss]/Equity)

= 1350000/3750000 * 100 = 36%

Receivable Turnover = Receivables/Turnover = 8.75%

Inventory Turnover = Inventory/Turnover = 9.25%

Fixed Assets Turnover = Fixed Assets/Turnover = 20%

Total Assets Turnover = Total Assets/Turnover = 40%