Financial and Managerial Accounting
Financial and Managerial Accounting
7th Edition
ISBN: 9781259726705
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 13, Problem 4PSA

(1)

To determine

To compute: Current ratio of C Corporation.

(1)

Expert Solution
Check Mark

Explanation of Solution

Given,
Current assets are $86,900
Current liabilities are $24,000

Formula to calculate current ratio is:

    Currentratio= Currentassets Currentliabilities

Substitute $86,900 for current assets and $24,000 for current liabilities.

    Current ratio for 2017= $86,900 $24,000 =3.62

Thus current ratio is 3.62.

Working notes:

Calculation of current assets,

    Currentassets=( Cash+Short-term investments+Accountsreceivable +Notes receivable+Merchasdiseinventory+Prepaidexpenses ) =$10,000+$84,00+$29,200+$45,00+$32,150+$2,650 =$86,900

Calculation of current liabilities,
Currentliabilities=( Accountspayable+Accruedwagespayable +Incometaxpayable ) =$17,500+$3,200+$3,300 =$24,000

(2)

To determine

To compute: Acid test ratio of C Corporation.

(2)

Expert Solution
Check Mark

Explanation of Solution

Given,
Cash is $10,000.
Short term investments are $8,400.
Accounts receivables are $29,200.

Formula to calculate acid test ratio is,

    Acidtestratio= Cash + Short term investments + Accounts receivables Currentliabilities

Substitute $10,000 for cash, $8,400 for short term investments $29,200 for accounts receivable and $24,000 for current liabilities.

    Acidtestratio= $10,000+$8,400+$29,200 $24,000 = $47,600 $24,000 =1.98

Thus, acid test ratio is 1.98.

Working notes:

Calculation of current liabilities,
Currentliabilities=( Accountspayable+Accruedwagespayable +Incometaxpayable ) =$17,500+$3,200+$3,300 =$24,000

(3)

To determine

To compute: Day’s sales uncollected of C Corporation.

(3)

Expert Solution
Check Mark

Explanation of Solution

Given,
Accounts receivable is $29,200.
Net sales are $448,600.

Formula to calculate day’s sales uncollected is,

    Day'ssalesuncollected=( AccountsReceivable NetSales )×365

Substitute $29,200 for accounts receivable and $448,600 for net sales.

    Day'ssalesuncollected=( $29,200 $448,600 )×365 =23.76

Thus, day’s sales uncollected are 23.76 days.

(4)

To determine

To compute: Inventory turnover of C Corporation.

(4)

Expert Solution
Check Mark

Explanation of Solution

Given info,

Cost of goods sold is $297,250.
Inventory in the beginning of the year is $48,900.
Inventory at the end of the year is $32,150

Formula to calculate inventory turnover is,

    Inventory turnover=( Costofgoodssold Averageinventory )
    Averageinventory=( Inventory inthebegningoftheyear+ Inventory attheendoftheyear 2 )

Substitute $297,500 for cost of goods sold and $48,900 for inventory in the beginning of the year and $32,150 at the end of the year.

    Inventory turnover= 297,250 ( $48,900+32,150 2 ) = $297,250 $40525 =7.33

Thus, inventory turnover is 7.33.

(5)

To determine

To compute: Day’s sales inventory of C Corporation.

(5)

Expert Solution
Check Mark

Explanation of Solution

Given info,

Inventory at the end of the year is $32,150
Cost of goods sold is $297,250

Formula to calculate day’s sales in inventory is,

    Day’s sales in inventory =( Inventoryattheendoftheyear Costofgoodssold )×365

Substitute $297,500 for cost of goods sold and $32,150 for inventory at the end of the year.

    Day’s sales in inventory =( $32,150 $297,250 )×365 =39.48

Thus, day’s sales inventory is 39.48 days.

(6)

To determine

To compute: Debt and equity ratio of C Corporation.

(6)

Expert Solution
Check Mark

Explanation of Solution

Given info,

Long term notes payable is $63,400.
Equity is $152,800

Formula to calculate debt and equity ratio is,

    Debt and equity ratio= Debt Equity

Substitute $63,400 for debt and $152,800 for equity.

    Debt and equity ratio= $63,400 $152,800 =0.41

Thus, debt and equity ratio is 0.41.

Working notes:

Calculation of equity,

    Equity=Commonstock+Retainedearnings =$90,000+$62,800 =$152,800

(7)

To determine

To compute: Time interest earned ratio of C Corporation.

(7)

Expert Solution
Check Mark

Explanation of Solution

Given info,

Income before interest and tax is $52,750.
Interest expense is $4,100.

Formula to calculate time interest earned ratio is,

    Time interest earned ratio= Incomebeforeinterestandtax Interestexpense

Substitute $52,750 for income before interest and tax and $4,100 for interest expense.

    Time interest earned ratio = $52,750 $4,100 =12.87

Thus, time interest earned ratio is 12.87.

(8)

To determine

To compute: Profit margin ratio of C Corporation.

(8)

Expert Solution
Check Mark

Explanation of Solution

Given,
Net income is $29,052.
Net sales are $448,600.

Formula to calculate Profit margin ratio is,

    Profit margin ratio= Netincome Netsales ×100

Substitute $29,052 for net income and $448,600 for net sales.

    Profit margin ratio= $29,052 $448,600 ×100 =6.48%

Thus, profit margin ratio is 6.48%.

(9)

To determine

To compute: Total assets turnover ratio of C Corporation.

(9)

Expert Solution
Check Mark

Explanation of Solution

Given,
Net sales are $448,600.
Assets in the beginning of the year are $189,400.
Assets at the end of the year are $240,200.

Formula to calculate total assets turnover ratio is,

    Total assets turnover ratio= Netsales Averagetotalassets
    Averagetotalassets= ( Assets inthebeginningoftheyear +Assetsattheendoftheyear ) 2

Substitute $448,600 for net sales and $189,400 for assets in the beginning of the year and $240,200 at the end of the year.

    Total assets turnover ratio= $448,600 ( $189,400+$240,200 2 ) = $448,600 $214800 =2.1

Thus, total assets turnover ratio is 2.1.

(10)

To determine

To compute: Return on total assets ratio of C Corporation.

(10)

Expert Solution
Check Mark

Explanation of Solution

Given,
Net income is $29,052.
Assets in the beginning of the year are $189,400.
Assets at the end of the year are $240,200.

Formula to calculate return on total assets ratio is,

    Return on total assets ratio= Net Income Averagetotalassets
    Averagetotalassets= ( Assets inthebeginningoftheyear +Assetsattheendoftheyear ) 2

Substitute $29,052 for net income and $189,400 for assets in the beginning of the year and $240,200 at the end of the year.

    Return on total assets ratio= $29,052 ( $189,400+$240,200 2 ) = $29,052 $214800 =0.14

Thus, return on total assets ratio is 0.14.

(11)

To determine

To compute: Return on common stockholder’s equity of C Corporation.

(11)

Expert Solution
Check Mark

Explanation of Solution

Given,
Net income is $29,052.
Common stock in the beginning of the year is $90,000.
Common stock at the end of the year is $90,000.

Formula to calculate return on common stockholder’s equity is,

    [ Return on common stockholder’s equity ]=[ NetincomePreferreddividends Averagecommon stockholder’s equity ×100 ]
    Averagecommonstock= ( Common stock inthebeginningoftheyear +Common stockattheendoftheyear ) 2

Substitute $29,052 for net income and $90,000 for common stock in the beginning of the year and $90,000 at the end of the year.

    Return on common stockholder’s equity= $29,052$0 ( $90,000+$90,000 2 ) ×100 = $29,052 $90,000 =32.28%

Thus, return on common stockholder’s equity is 32.28%.

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Chapter 13 Solutions

Financial and Managerial Accounting

Ch. 13 - Prob. 6DQCh. 13 - Prob. 7DQCh. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - Prob. 10DQCh. 13 - Prob. 11DQCh. 13 - Prob. 12DQCh. 13 - Where on the income statement does a company...Ch. 13 - Prob. 14DQCh. 13 - Prob. 15DQCh. 13 - Samsung Refer to Samsung’s financial statements in...Ch. 13 - Prob. 17DQCh. 13 - Prob. 1QSCh. 13 - Prob. 2QSCh. 13 - Prob. 3QSCh. 13 - Prob. 4QSCh. 13 - Prob. 5QSCh. 13 - Prob. 6QSCh. 13 - Prob. 7QSCh. 13 - Prob. 8QSCh. 13 - Prob. 9QSCh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Exercise 13-6 Common-size percents P2 Simon...Ch. 13 - Prob. 7ECh. 13 - Exercise 13-8 Liquidity analysis and...Ch. 13 - Exercise 13-9 Risk and Capital structure analysis...Ch. 13 - Exercise 13-10 Efficiency and Profitability...Ch. 13 - Exercise 13-11 profitability analysis P3 Refer to...Ch. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Prob. 15ECh. 13 - Prob. 1PSACh. 13 - Prob. 2PSACh. 13 - Prob. 3PSACh. 13 - Problem 13-4A Calculation of financial statement...Ch. 13 - Prob. 5PSACh. 13 - Prob. 6PSACh. 13 - Prob. 1PSBCh. 13 - Prob. 2PSBCh. 13 - Prob. 3PSBCh. 13 - Prob. 4PSBCh. 13 - Prob. 5PSBCh. 13 - Problem 13-6BAIncome statement computations and...Ch. 13 - Use the following selected data from Business...Ch. 13 - Prob. 1BTNCh. 13 - Prob. 2BTNCh. 13 - Prob. 3BTNCh. 13 - Prob. 4BTNCh. 13 - Prob. 5BTNCh. 13 - Prob. 6BTNCh. 13 - ENTREPRENEURIAL DECISION A1 P1 P2 P3 BTN 13-7...Ch. 13 - Prob. 8BTNCh. 13 - Samsung (Samsung.com). a leading manufacturer of...
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Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License