Answer each of the questions in the following unrelated situations..docx

Answer each of the questions in the following unrelated
situations.
(a)
The current ratio of a company is 6:1 and its acid-test ratio is
1:1. If the inventories and prepaid items amount to $494,800,
what is the amount of current liabilities?
Current Liabilities
$
[removed]
(b)
A company had an average inventory last year of $159,000 and
its inventory turnover was 6. If sales volume and unit cost
remain the same this year as last and inventory turnover
is 8 this year, what will average inventory have to be during the
current year?
(Round answer to 0 decimal places, e.g. 125.)
Average Inventory
$
[removed]
(c)
A company has current assets of $89,370 (of which $36,250 is
inventory and prepaid items) and current liabilities of $36,250.
What is the current ratio? What is the acid-test ratio? If the
company borrows $10,270 cash from a bank on a 120-day loan,
what will its current ratio be? What will the acid-test ratio be?
(Round answers to 2 decimal places, e.g. 2.50.)
Current Ratio
[removed]
:1
Acid Test Ratio
[removed]

:1
New Current Ratio
[removed]
:1
New Acid Test Ratio
[removed]
:1
(d)
A company has current assets of $583,200 and current
liabilities of $235,100. The board of directors declares a cash
dividend of $173,600. What is the current ratio after the
declaration but before payment? What is the current ratio after
the payment of the dividend?
(Round answers to 2 decimal places, e.g. 2.50.)
Current ratio after the declaration but before payment
[removed]
:1
Current ratio after the payment of the dividend
[removed]
:1
Heartland Company’s budgeted sales and budgeted cost of
goods sold for the coming year are $142,310,000 and
$97,650,000, respectively. Short-term interest rates are
expected to average 10%. If Heartland can increase inventory
turnover from its present level of 9 times a year to a level of 12
times per year.
Compute its expected cost savings for the coming year.
Expected Cost Savings
$
[removed]

The following information pertains to Wamser Company:
Cash
$22,000
Accounts receivable
125,500
Inventory
74,500
Plant assets (net)
384,000
Total assets
$606,000
Accounts payable
$74,500
Accrued taxes and expenses payable
24,500
Long-term debt
49,500

Common stock ($10 par)
165,000
Paid-in capital in excess of par
89,000
Retained earnings
203,500
Total equities
$606,000
Net sales (all on credit)
$801,000
Cost of goods sold
605,000
Net income
80,500
Compute the following:
(Round answers to 2 decimal places e.g. 15.25.)
(a)
Current ratio
[removed]

: 1
(b)
Inventory turnover
[removed]
times
(c)
Accounts receivable turnover
[removed]
times
(d)
Book value per share
$
[removed]
(e)
Earnings per share
$
[removed]
(f)
Debt to assets

[removed]
%
(g)
Profit margin on sales
[removed]
%
(h)
Return on common stock equity
[removed]
%
Your answer is incorrect. Try again.
The following data is given:
December 31,
2015
2014
Cash
$65,500

$51,000
Accounts receivable (net)
89,500
59,000
Inventories
89,500
115,000
Plant assets (net)
383,000
325,000

Accounts payable
55,000
40,000
Salaries and wages payable
10,000
5,000
Bonds payable
70,500
71,000
8% Preferred stock, $40 par
100,000
100,000
Common stock, $10 par
120,000

90,000
Paid-in capital in excess of par
85,000
70,000
Retained earnings
187,000
174,000
Net credit sales
905,000

Cost of goods sold
745,000
Net income
83,000
Compute the following ratios:
(Round answers to 2 decimal places e.g. 15.25.)
(a)
Acid-test ratio at 12/31/15
[removed]
: 1
(b)
Accounts receivable turnover in 2015
[removed]
times
(c)
Inventory turnover in 2015

[removed]
times
(d)
Profit margin on sales in 2015
[removed]
%
(e)
Return on common stock equity in 2015
[removed]
%
(f)
Book value per share of common stock at 12/31/15
As loan analyst for Utrillo Bank, you have been presented the
following information.
Toulouse Co.
Lautrec Co.
Assets

Cash
$116,300
$311,800
Receivables
220,600
305,700
Inventories
573,900
512,000
Total current assets
910,800
1,129,500
Other assets
500,500

617,600
Total assets
$1,411,300
$1,747,100
Liabilities and Stockholders’ Equity
Current liabilities
$303,300
$350,200
Long-term liabilities
403,900

500,500
Capital stock and retained earnings
704,100
896,400
Total liabilities and stockholders’ equity
$1,411,300
$1,747,100
Annual sales
$944,400
$1,494,000
Rate of gross profit on sales
30
%
35
%
Each of these companies has requested a loan of $49,190 for 6
months with no collateral offered. Because your bank has
reached its quota for loans of this type, only one of these
requests is to be granted.
Compute the various ratios for each company.
(Round answer to 2 decimal places, e.g. 2.25.)

Toulouse Co.
Lautrec Co.
Current ratio
[removed]
: 1
[removed]
: 1
Acid-test ratio
[removed]
: 1
[removed]
: 1
Accounts receivable turnover
[removed]
times
[removed]
times
Inventory turnover
[removed]
times
[removed]
times
Cash to current liabilities
[removed]

: 1
[removed]
: 1
Bradburn Corporation was formed 5 years ago through a public
subscription of common stock. Daniel Brown, who owns 15% of
the common stock, was one of the organizers of Bradburn and is
its current president. The company has been successful, but it
currently is experiencing a shortage of funds. On June 10, 2015,
Daniel Brown approached the Topeka National Bank, asking for
a 24-month extension on two $35,120 notes, which are due on
June 30, 2015, and September 30, 2015. Another note of $6,450
is due on March 31, 2016, but he expects no difficulty in paying
this note on its due date. Brown explained that Bradburn’s cash
flow problems are due primarily to the company’s desire to
finance a $306,700 plant expansion over the next 2 fiscal years
through internally generated funds.
The commercial loan officer of Topeka National Bank requested
financial reports for the last 2 fiscal years.
BRADBURN CORPORATION
BALANCE SHEET
MARCH 31
Assets
2015
2014
Cash
$18,700
$13,020
Notes receivable

148,930
133,260
Accounts receivable (net)
132,830
126,510
Inventories (at cost)
105,160
51,630
Plant & equipment (net of depreciation)
1,459,800
1,422,000
Total assets
$1,865,420
$1,746,420
Liabilities and Owners’ Equity
Accounts payable
$81,630

$91,500
Notes payable
76,690
63,050
Accrued liabilities
16,718
9,000
Common stock (130,000 shares, $10 par)
1,300,000
1,300,000
Retained earnings
a
390,382
282,870
Total liabilities and stockholders’ equity
$1,865,420
$1,746,420
a
Cash dividends were paid at the rate of $1 per share in fiscal
year 2014 and $2 per share in fiscal year 2015.

BRADBURN CORPORATION
INCOME STATEMENT
FOR THE FISCAL YEARS ENDED MARCH 31
2015
2014
Sales revenue
$3,013,400
$2,719,000
Cost of goods sold
a
1,539,400
1,431,400
Gross margin
1,474,000
1,287,600
Operating expenses
861,480
790,300
Income before income taxes
612,520
497,300
Income taxes (40%)

245,008
198,920
Net income
$367,512
$298,380
a
Depreciation charges on the plant and equipment of $110,200
and $112,800 for fiscal years ended March 31, 2014 and 2015,
respectively, are included in cost of goods sold.
(a)
Compute the following items for Bradburn Corporation.
(Round answer to 2 decimal places, e.g. 2.25.)
(1)
Current ratio for fiscal years 2014 and 2015.
(2)
Acid-test (quick) ratio for fiscal years 2014 and 2015.
(3)
Inventory turnover for fiscal year 2015.
(4)
Return on assets for fiscal years 2014 and 2015. (Assume total
assets were $1,693,000 at 3/31/13.)
(5)

Percentage change in sales, cost of goods sold, gross margin,
and net income after taxes from fiscal year 2014 to 2015.
2014
2015
(1)
Current ratio
[removed]
:1
[removed]
:1
(2)
Acid-test (quick) ratio
[removed]
:1
[removed]
:1
(3)
Inventory turnover
[removed]

times
(4)
Return on assets
[removed]
%
[removed]
%
(5)
Percent Changes
Percent Increase
Sales revenue
[removed]
%
Cost of goods sold
[removed]
%
Gross margin
[removed]
%

Net income after taxes
[removed]
%

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