Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem E9.26E
Evaluating ratio data
| Learning Objective 5 |
Abanaki Carpets reported the following amounts in its 2018 financial statements. The 2011 figures are given for comparison.
| 2018 2017 | |
| Balance sheet partial Current Assets: Cash Short-term Investments Less: Allowance far Merchandise Inventory Prepaid Insurance Total Current Assets Total Current Liabilities Income statement partial Net Sales (all on account) |
$ 5,000 $ 11.000 25,000 14,000 $ 64000 $ 77.000 (7.000) 57,000 (6,000) 71000 194.000 190.000 2,000 2.000 283,000 288,000 105,000 107,000 742,400 730,000 |
Requirements
1. Calculate Abanaki’s acid-test ratio for 2018. (Round to two decimals.) Determine whether Abanaki’s acid-test ratio improved or deteriorated from 2017 to 2018. How does Abanaki’s acid-test ratio compare with the industry average of 0.80?
2. Calculate Abanaki’s accounts receivable turnover ratio. (Round to two decimals.) How does Abanaki’s ratio compare to the industry average accounts receivable turnover of 10?
3. Calculate the days’ sales in receivables for 2018. (Round to the nearest day.) How do the results compare with Abanaki’s credit terms of net 30?
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Selected information from Bigg Company's financial statements follows:
Fiscal Year Ended December 31
2019
2018
2017
(in thousands)
Gross sales
$2,004,719
$1,937,021 $1,835,987
Less: Sales discounts
4,811
4,649
4,406
Less: Sales returns and allowances
2,406
2,324
2,203
Net sales
$1,997,502
$1,930,048 $1,829,378
Cost of goods sold
621,463
619,847
660,955
Gross profit
$1,376,039
$1,310,201 $1,168,423
Operating expenses
577,369
595,226
583,555
Operating income
$798,670
$714,975
$584,868
Other income (expenses)
15,973
(6,070)
(8,773)
Net income
$814,643
$708,905
$576,095
At December 31
2019
2018
2017
(in thousands)
Accounts receivable
$201,290
$195,427
$182,642
Less: Allowance for doubtful accounts
2,516
2,736
2,192
Net accounts receivable
$198,774
$192,691
$180,450
Required:
1. Calculate the following ratios for 2018 and 2019. Round your answers to two decimal places.
2018
2019
a. Gross profit margin
67.88
%
68.89
%
b. Operating margin
37.04
39.98
c. Net profit margin
х %
36.77
40.78
%
d.…
Selected information from Bigg Company's financial statements follows:
Fiscal Year Ended December 31
2019
2018(in thousands)
2017
Gross sales
$2,004,719
$1,937,021
$1,835,987
Less: Sales discounts
4,811
4,649
4,406
Less: Sales returns and allowances
2,406
2,324
2,203
Net sales
$1,997,502
$1,930,048
$1,829,378
Cost of goods sold
621,463
619,847
660,955
Gross profit
$1,376,039
$1,310,201
$1,168,423
Operating expenses
577,369
595,226
583,555
Operating income
$798,670
$714,975
$584,868
Other income (expenses)
15,973
(6,140)
(8,773)
Net income
$814,643
$708,835
$576,095
At December 31
2019
2018(in thousands)
2017
Accounts receivable
$201,290
$195,427
$182,642
Less: Allowance for doubtful accounts
2,516
2,736
2,192
Net accounts receivable
$198,774
$192,691
$180,450
Required:
1. Calculate the following ratios for 2018 and 2019. Round your answers…
Return on total assets ratio: net income/ avg. total assets
21,331/(321,195+225,248)/2= 0.07807= 7.8% (Amazon 2020 year)
6.0% (Amazon 2019 year)
6.37% (Walmart 2020 year)
Write financial analysis report.
Chapter 9 Solutions
Horngren's Accounting (12th Edition)
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Ch. 9 - What is the difference between accounts receivable...Ch. 9 - List some common examples of other receivables,...Ch. 9 - Prob. 3RQCh. 9 - When dealing with receivables, give an example of...Ch. 9 - What type of account must the sum of all...Ch. 9 - Prob. 6RQCh. 9 - What occurs when a business factors its...Ch. 9 - What occurs when a business pledges its...Ch. 9 - What is the expense account associated with the...Ch. 9 - When is bad debts expense recorded when using the...Ch. 9 - What are some limitations of using the direct...Ch. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - When using the allowance method, what account is...Ch. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - How do the percent-of-receivables and...Ch. 9 - What is the difference between the...Ch. 9 - In accounting for bad debts, how do the income...Ch. 9 - What is the formula to compute interest on a note...Ch. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. S9.1SECh. 9 - Recording credit sales and collections Learning...Ch. 9 - Applying the direct write-off method to account...Ch. 9 - Collecting a receivable previously written...Ch. 9 - Applying the allowance method to account for...Ch. 9 - Applying the allowance method (percent-of-sales)...Ch. 9 - Applying the allowance method...Ch. 9 - Applying the allowance method...Ch. 9 - Computing interest amounts on notes receivable...Ch. 9 - Accounting for a note receivable Learning...Ch. 9 - Accruing interest revenue and recording collection...Ch. 9 - Recording a dishonored note receivable Learning...Ch. 9 - Prob. S9.13SECh. 9 - Defining common receivables terms Learning...Ch. 9 - E9-15 Identifying and correcting internal control...Ch. 9 - Recording credit sales and collections Learning...Ch. 9 - Journalizing transactions using the direct...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Prob. E9.21ECh. 9 - Journalizing credit sales, note receivable...Ch. 9 - Journalizing note receivable transactions...Ch. 9 - Journalizing note receivable transactions Learning...Ch. 9 - Journalizing note receivable transactions Learning...Ch. 9 - Evaluating ratio data Learning Objective 5 Abanaki...Ch. 9 - Computing the collection period for receivables...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Prob. P9.31APGACh. 9 - Accounting for notes receivable and accruing...Ch. 9 - Prob. P9.33APGACh. 9 - Using ratio data to evaluate a company’s financial...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Accounting for uncollectible accounts using the...Ch. 9 - Prob. P9.37BPGBCh. 9 - Prob. P9.38BPGBCh. 9 - Prob. P9.39BPGBCh. 9 - Accounting for notes receivable, dishonored notes,...Ch. 9 - Using ratio data to evaluate a company’s financial...Ch. 9 - Prob. P9.42CTCh. 9 - Prob. P9.43CPCh. 9 - Prob. P9.44PSCh. 9 - Prob. 9.1TIATCCh. 9 - Decision Case 9-1 Weddings on Demand sells on...Ch. 9 - Decision Case 9-2 Pauline’s Pottery has always...Ch. 9 - Prob. 9.1FCCh. 9 - Financial Statement Case 9-1 Use Target...
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