FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Prior Company’s condensed financial statements provide the following information.

Prior Company
Balance Sheet
 
Dec. 31, 2020
000
Dec. 31, 2019
Cash
$1,052,000)
$1,060,000)
Accounts receivable (net)
198,000)
80,000)
Short-term investments
80,000)
40,000)
Inventory
440,000)
360,000)
Prepaid expenses
#1,603,000)
#1,607,000)
 Total current assets
$0,773,000)
$0,547,000)
Property, plant, and equipment (net)
$1,857,000)
$1,853,000)
 Total assets
$1,630,000)
$1,400,000)
Current liabilities
240,000)
160,000)
Bonds payable
400,000)
400,000)
Common stockholders’ equity
$1,990,000)
$1,840,000)
 Total liabilities and stockholders’ equity
$1,630,000)
 
$1,400,000)

 

00

Income Statement
For the Year Ended 2020
Sales revenue
$1,640,000)
Cost of goods sold
$ (800,000)
Gross profit
840,000)
Selling and administrative expenses
(440,000)
Interest expense
00.(40,000)
Net income
$  360,000)

 

Instructions

a.   Determine the following for 2020.

1.   Current ratio at December 31.

2.   Acid-test ratio at December 31.

3.   Accounts receivable turnover.

4.   Inventory turnover.

5.   Return on assets.

6.   Profit margin on sales.

b.   Prepare a brief evaluation of the financial condition of Prior Company and of the adequacy of its profits.

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