Question

Please answer with explanations.

Presented here are the comparative balance sheets of Hames Inc. at December 31, 2020 and 2019. Sales for the year ended December 31, 2020, totaled $500,000. HAMES INC. Balance Sheets December 31, 2020 and 2019 2020 2019 Assets Cash Accounts receivable Merchandise inventory $ 20,000 72,000 99,000 $ 21,000 78,000 103,000 $202,000 50,000 125,000 (65,000) $312,000 $191,000 40,000 110,000 (60,000) $281,000 Total current assets Land Plant and equipment Less: Accumulated depreciation Total assets Liabilities Short-term debt Accounts payable Other accrued liabilities $ 17,000 75,500 18,000 $110,500 30,000 $140,500 $ 18,000 64,800 20,000 $102,800 22,000 $124,800 Total current liabilities Long-term debt Total liabilities Stockholders' Equity Common stock, no par, 100,000 shares authorized 40,000 and 25,000 shares issued, respectively Retained earnings: Beginning balance Net income for the year Dividends for the year Ending balance Total stockholders' equity Total liabilities and stockholders' equity $ 59,000 $ 74,000 $ 81,500 51,700 (20,000) $113,200 $187,200 $312,000 $ 85,000 1,500 (5,000) $ 81,500 $140,500 $281,000 Required: a. Calculate ROI for 2020. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) b. Calculate ROE for 2020. (Round your answer to 1 decimal place.) c. Calculate working capital at December 31, 2020. d. Calculate the current ratio at December 31, 2020. (Round your answer to 2 decimal places.) e. Calculate the acid-test ratio at December 31, 2020. (Round your answer to 2 decimal places.) f. Assume that on December 31, 2020, the treasurer of Hames decided to pay $15,000 of accounts payable. What impact, if any, this payment will have on the answers you calculated for parts a-d (increase, decrease, or no effect). g. Assume that instead of paying $15,000 of accounts payable on December 31, 2020. Hames collected $15,000 of accounts receivable. What impact, if any, this receipt will have on the answers you calculated for parts a-d (increase, decrease, or no effect).

Answer 1

51700 61 ROE ROE = Aฤwei Hames Inc. Glallation of various fallos Raho formula Explanahon 9: ROI ROB : Net Income Return on Investment (ROI) show you Average Total Assets how much the company earns return hom the invested funds through the assets [[3/2000 + 281000)/2] It is the return from application of = 17.44 % funds Net Income - Return on Equity CROE) shows the Avevage Owner's Equity how much retum n that company egros I from equity invested through net income 51700 [(187200+140500)/2] It shows the return from stockholder's = equity 31,6% Working capital megni company's Working | Working - Total current - Total canent lighisitas capial capital Assets . curent current assets meets it Lighlites It shows' company has eligibility to meet their the current liabilitie. - 202000 - 102800 - 99200 current Ry Ho is the best meg syne J. Consent Current Corrent Assett lof short term sonency. Current Ratio | Ratjo potjo Curent liabilities is calcuylgh' by current assets divided 202000 by camere ligbilitie. It will be best I for ratio of :). TOL800 - 1.96 e acid Test Acid Test Urrent – Inventory / Aud Test Ratt' is also known 45 I patjo Assets o I fatio l ouick a Quick Asset Rytjo. It is more conservative Current Ligbilitis measure of short term lithinity. Quich 202000 - 109000 Assets means canent assets minus Inventories. It is better than current : 0.96 Ratio. 102300

siputon Impact on Impact If co. Jail ROI Increase Exeling the | It will increast because the ash goes down. New Rof is Pays 1hood" : 53700 17.88% - 7312000 - 1 scoa to Accounts Payable then Impact 16. ROE I No Impact I No Impyet Working Spityl 2 It will be no impact as no income and stockholder's equity & increare or decrease It will be no impact as namet increase and decrepse in current qs set ant current liabilities It will increase ar follows: 1 2.11 202000 - Isovo 103800 - 150co current | Increase Potjo

No Impact It will have no impact as the If Gmeionya. | ROI olleets (1000 AM No Impact receivable b. ROE then Impal No Impact Working apital . Assets will be same It will have no impact as no assets incelyded in the formyta It will have no impact as some increase ani decrease in current groets. 1. It will have no impact 95 the same increase and decrease in cyrrent Assetos .I carrent Ratta , No Impact