Question

The following information is available about the company: a. All sales during the year were on account. b. There was no change in the number of shares of common stock outstanding during the year. C. The interest expense on the income statement relates to the bonds payable; the amount of bonds outstanding did not change during the year. d. Selected balances at the beginning of the current year were: Accounts receivable Inventory Total assets $ 160,000 $ 280,000 $2,160,000 e. Selected financial ratios computed from the statements below for the current year are: $ Earnings per share Debt-to-equity ratio Accounts receivable turnover Current ratio Return on total assets Times interest earned ratio Acid-test ratio Inventory turnover 4.83 0.900 16.0 2.60 12% 8.0 1.19 6.0

Answer 1

Answer -> Compute the missing amounts on the company's financial Statements - Industries Income Statement for the year ended Match, 31 Sales cost of goods sold Gross margin Sering and administrative expenses Net operating Income Interest expense Net Income before taxes Income Taxes (40) $ 3100 000 $ (1939800 15 1160200 $ 967088 $193112 $46000 $339 112 $(13 5645) $203467 Net Income

Pepper Industries Balance Sheet March 31 Current assets $275650 $33750 $366600 $676000 $ 555111 $ 1231111 Cash Accounts receivable, net Inventory Total current assets plant and Equipment, net Total assets liabilities : Current liabilities Bonds payable, 10% Total liabilities stockholder's Equity common stock $2.60 bar value Retained earnings $260000 $ 460000 $720000 $109528 $401583 $511111 $1231111 Total Stockhoider's Equity Total liabilities and stockholder's Equity

Working Notes 0 Accounts receivable turnovey Account Teceivable turnover 3 Sales Average Accounts receivable $3100000 Average Accounts Weceivable $ 3100 000 Average Accounts receivable a 16 = $193750 Average Accounts TI receivable $193750 Ending Accounts Beginning Accounts & Ending Accounts receivable Yeceivable = $ 160000 + 8 Ending Accounts yeceivable - $193750 - $160000 - $33750 receivable

current ratio – Acid test ratio = 2.60-1.19 Current assets - (current assets - Inventory) = 1.41 current liabilities current liabilities = 1.41 Current assort-Current assets + Inventory current liabilities Inventory -1.41 Current liabilities = 1.41 Inventory $260000 Inventory a $366600

© Inventory Turnover = COGS Average inventory 6 = COGS $280 000 +316600 6 = COGS $323300 COGS = $1939800

Interest expense = facevalue of x Interest rate bonds = Face value of bonds Interest Expense Interest rate $46000 x 100 = $ 460000 → Bonds payable = $460000 Debt to equity - Debt ratio Equity 0.9 = $460000 Equity Equity = $4600000 0.9 = $5,11,111

6 Return on total = Net profit assets Average total assets Total liabilities and stock holder's Equity = $12311 So, total assets = $1231111 Average total assets = $1231111 + $8 2160 000 = $ 1695555.5 Return on total assets $1695555.5 - Net profit 12 = Net profit Too $1695555.5 Net profit = $1695555.5x Net profit - $203466.66 = $203467 12 100

6 current ratio= current assets Current liabilities 2.60 = Current assets $260 000 current assets = $2600008 2.60 = $676000 cash = $676000-$366600- $33750 - $275650 plant and Equipment = $1231111- $ 676000 - $555111 Earning per share = Net profit Average Equity shares $4.83 - $203467 Average Equity cuares Average Equity shares = $203467 $4.83 = 42126 Shares common stock 421266 $2.60 - $109528