193)
Express the following income statement information in common-size percentages and in trend
percentages using 2016 as the base year.
Common-Size Trend
Percentages Percentages
2017 2016 2017 2016 2017 2016
Sales $540,000 $460,000 ______ ______ _____ ______
__ __ __
Cost of goods sold. 290,000 240,000 ______ ______ _____ ______
__ __ __
Gross profit $250,000 $220,000 ______ ______ _____ ______
__ __ __
194)
The comparative balance sheet for Silverlight Co. is shown below. Express the balance sheet in
common-size percentages.
Silverlight CompanyComparative Balance Sheets (in $000)December 31, 2016
—2018
2018
2017
2016
$ 49.6
$ 34.2
$ 35.7
74.4
85.5
76.5
148.8
125.4
91.8
347.2
324.9
306.0
$620.0
$570.0
$510.0
$117.8
$ 51.3
$ 76.5
130.2
159.6
107.1
266.6
279.3
265.2
105.4
79.8
61.2
2017
2016
Assets
Cash
$ 43,000
$ 22,000
Accounts receivable
38,000
42,000
Merchandise inventory
61,000
52,000
Prepaid insurance
6,000
9,000
Long-term investments
49,000
20,000
Plant assets (net)
218,000
218,000
Total assets
$415,000
$363,000
Liabilities and Equity
Current liabilities
$ 62,000
$ 75,000
105.4
79.8
61.2
$620.0
$570.0
$510.0
195)
Express the following balance sheets for Safety Company in common-size percentages.
Safety Company
Balance Sheets
December 31, 2017 and 2016
102
Current liabilities
$ 62,000
$ 75,000
Long-term liabilities
45,000
36,000
Common stock
150,000
150,000
Retained earnings
158,000
102,000
Total liabilities and equity
$415,000
$363,000
196)
Express the following income statement information in common-size percentages (round to nearest
whole percent). Comment on the results.
Haans Corp.
Comparative Income Statements
For Years Ended December 31, 2018 and 2017
2018
2017
Sales 103
$1,200,000
$1,000,000
Sales
$1,200,000
$1,000,000
Cost of goods sold
804,000
650,000
Gross profit
$ 396,000
$ 350,000
Selling expenses
132,000
120,000
Administrative expenses
180,000
150,000
Net income
$ 84,000
$ 80,000
197)
Use the balance sheets of Glover shown below to calculate the following ratios for 2018 (round to
the hundredths):
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt ratio.
(d) Equity ratio.
Glover Company
Balance Sheets
December 31, 2018 and 2017
2018
2017
Assets:
Cash
$ 43,000
$ 22,000
Accounts receivable 104
38,000
42,000
Accounts receivable
38,000
42,000
Merchandise inventory
61,000
52,000
Prepaid insurance
6,000
9,000
Long-term investments
49,000
20,000
Plant assets (net)
218,000
218,000
Total assets
$415,000
$363,000
Current liabilities
$ 62,000
$ 75,000
Long-term liabilities
45,000
36,000
Common stock
150,000
150,000
Retained earnings
158,000
102,000
Total liabilities and equity
$415,000
$363,000
198)
The following information is available for the Starr Corporation:
Sales
$750,000
Cost of goods sold
450,000
Gross profit
300,000
Operating income
85,000
Net income
42,000
Inventory, beginning-year
71,200
Inventory, end-of-year
48,800
Calculate the company’s inventory turnover and its days’ sales in inventory.
199)
The following current year information is available from a manufacturing company:
Sales
$740,000
Gross profit on sales
276,000
Operating income
64,000
Income before taxes
44,000
Net income
33,600
Accounts Receivable, beginning-year
58,000
Accounts Receivable, end-of-year
72,000
Calculate the company’s accounts receivable turnover and its days’ sales uncollected.
200)
Information from a manufacturing company’s current year income statement follows. Calculate the
company’s (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned.
Sales
$850,000
Cost of goods sold
455,000
Gross profit
$395,000
Operating expenses
260,000
Operating income
$ 135,000
Interest expense
32,000
Income before taxes
$103,000
Income taxes expense
12,400
Net income
$ 90,600
201)
A company reported net income of $78,000 and had 15,000 common shares outstanding
throughout the current year. At year-end, the price per share of the company’s stock was $49.40.
What is the company’s year-end price-earnings ratio?
108
Income statement data
Sales (all on credit)…………………………………
$650,000
Cost of goods sold………………………………….
425,000
Income before taxes………………………………..
78,000
Net income…………………………………………
54,600
SHORT ANSWER QUESTIONS
202)
A company paid cash dividends on its preferred stock of $40,000 in the current year when its net
income was $120,000 and its average common stockholders’ equity was $640,000. What is the
company’s return on common stockholders’ equity?
ESSAY QUESTIONS
203)
Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days’ sales uncollected.
(e) Inventory turnover.
(f) Days’ sales in inventory.
Ending
Balances
Beginning
Balances
Cash
$ 19,500
$ 15,000
Accounts receivable (net)
65,000
60,000
Inventory
71,500
64,500
Plant and equipment (net)
195,000
183,900
Total assets
$351,000
$323,400
Current liabilities
$ 62,400
$ 52,700
Long-term notes payable
97,500
100,000
109
204)
A company’s calendar-year financial data are shown below. The company had total assets of
$339,000 and total equity of $144,400 for the prior year. No additional shares of common stock
were issued during the year. The December 31 market price per share is $49.50. Cash dividends of
$19,500 were paid during the year. Calculate the following ratios for the company:
(a) profit margin ratio
(b) gross margin ratio
(c) return on total assets
(d) return on common stockholders’ equity
(e) book value per common share
(f) basic earnings per share
(g) price earnings ratio
(h) dividend yield.
Net sales
$650,000
Cost of goods sold
422,500
Gross profit
$227,500
Operating expenses
140,500
Operating income
$ 87,000
Interest expense
9,100
Income before taxes
$ 77,900
Income taxes
23,400
Net income
$ 54,500
Cash
Ending
Balances
$ 19,500
Accounts receivable (net)
65,000
Inventory
71,500
Plant assets (net)
195,000
Total assets
$351,000
Current liabilities
$ 74,100
Long-term notes payable
97,500
Common stock, $5 par value
65,000
Retained earnings
114,400
Total liabilities and equity
$351,000
205)
A company’s calendar-year financial data are shown below. The company had total assets of
$339,000 and total equity of $144,400 for the prior year. No additional shares of common stock
were issued during the year. The December 31 market price per share is $49.50. Cash dividends of
$19,500 were paid during the year. Calculate the following ratios for the company:
(a) debt ratio
(b) equity ratio
(c) debt–to-equity ratio
(d) times interest earned
(e) total asset turnover
Net sales
$650,000
Cost of goods sold
422,500
Gross profit
$227,500
Operating expenses
140,500
Operating income
$ 87,000
Interest expense
9,100
Income before taxes
$ 77,900
Income taxes
23,400
Net income
$ 54,500
Balances
Cash
$ 19,500
Accounts receivable (net)
65,000
Inventory
71,500
Plant assets (net)
195,000
Total assets
$351,000
Long-term notes payable
97,500
Common stock, $5 par value
65,000
Retained earnings
114,400
Total liabilities and equity
$351,000
111
206)
Comparative calendar-year financial data for a company are shown below. Calculate the following
ratios for the company for 2018:
(a) accounts receivable turnover
(b) day’s sales uncollected
(c) inventory turnover
(d) days’ sales in inventory
2018
2017
Sales
$ 720,000
$607,500
Cost of goods sold
450,000
382,700
Operating expenses
168,500
134,900
Net income
51,200
51,700
December 31,
December 31,
2018
2017
Accounts receivable (net)
$ 157,500
$162,500
Inventory
139,500
110,500
Total assets
1,012,500
944,800
207)
Comparative calendar year financial data for a company are shown below. Calculate the following
ratios for 2018:
(a) return on total assets
(b) return on common stockholders’ equity.
2018
2017
Sales
$ 720,000
$ 607,500
Gross profit
270,000
224,800
Income before taxes
79,200
78,700
Net income
51,200
51,700
2018
2017
Liabilities
$ 493,500
$ 452,500
Common stock ($12 par)
180,000
180,000
Contributed capital in excess of par
135,000
135,000
Retained earnings
204,000
177,300
Total liabilities and equity
$1,012,500
$ 944,800
Cash $ 38,000
Marketable securities
45,000
Accounts receivable (net)
127,500
Merchandise inventory
149,500
Long-term investments
Plant assets (net) 517,500
135,000
Total assets $ 1,012,500
Liabilities and equity:
Accounts payable
$ 148,700
Accrued liabilities
90,000
Notes payable (secured by plant assets)
Common stock ($12 par) 180,000
Contributed capital in excess of par
254,800
135,000
Retained earnings
204,000
Total liabilities and equity
$1,012,500
208)
The current year-end balance sheet data for a company are shown below. Calculate the company’s:
(a) working capital
(b) current ratio
(c) acid-test ratio.
Assets:
209)
The comparative income statements for Silverlight Company are shown below. Calculate the
following ratios for 2018:
(a) profit margin
(b) gross margin
(c) times interest earned.
Silverlight CompanyIncome StatementsFor Years Ended December 31,
2018
2017
Net sales
$720,000
$607,500
Cost of goods sold
450,000
382,700
Gross profit
$270,000
$224,800
Operating expense
168,500
134,900
Income from operations
$101,500
$ 89,900
Interest expense
22,300
11,200
Income before taxes
$ 79,200
$ 78,700
Income taxes
28,000
27,000
Net income
$ 51,200
$ 51,700
210)
A corporation reports the following year-end balance sheet data. Calculate the following ratios:
(a) working capital
(b) acid-test ratio
(c) current ratio
(d) debt ratio
(e) equity ratio
(f) debt-to-equity ratio
Cash……………………….. $ 50,000 Current liabilities $ 64,000
Accounts receivable………. 35,000 Long-term liabilities………. 72,000
Inventory………………….. 60,000 Common stock…………….. 100,000
Equipment………………… 140,000 Retained earnings…………. 49,000
Total assets……………….. $285,000 Total liabilities and equity $285,000