March 26, 2020

Problem 13-2B (60 minutes)

Part 1

Current ratio: December 31, 2015: $54,860 / $22,370 = 2.5 to 1

Part 2

BLUEGRASS CORPORATION

Common-Size Comparative Income Statements

For Years Ended December 31, 2015, 2014, and 2013

2015

2014

2013

Sales ............................................................

100.00%

100.00%

100.00%

Cost of goods sold ................................

54.77

51.91

46.04

Problem 13-2B (Concluded)

Part 3

BLUEGRASS CORPORATION

Balance Sheet Data in Trend Percents

December 31, 2015, 2014, and 2013

2015

2014

2013

Assets

Current assets ............................................

151.13%

89.97%

100.00%

Long-term investments .............................

0.00

16.04

100.00

Part 4

Significant relations revealed

Bluegrass's cost of goods sold took a larger percent of sales each year.

Selling and administrative expenses and income taxes took a somewhat

Problem 13-3B (60 minutes)

Trans-

action

Current

Assets

Quick

Assets

Current

Liabilities

Current

Ratio

Acid-Test

Ratio

Working

Capital

Beginning*

$300,000

$168,000

$120,000

2.50

1.40

$180,000

June 1

+120,000

+120,000

- 75,000

_______

________

____

____

_______

Bal.

345,000

288,000

120,000

2.88

2.40

225,000

June 3

+ 88,000

+ 88,000

- 88,000

- 88,000

________

____

____

_______

Bal.

345,000

288,000

120,000

2.88

2.40

225,000

June 5

+150,000

________

+150,000

____

____

_______

Bal.

495,000

288,000

270,000

1.83

1.07

225,000

Problem 13-4B (50 minutes)

1. Current ratio

2. Acid-test ratio

3. Days' sales uncollected

4. Inventory turnover

5. Days’ sales in inventory

6. Debt-to-equity ratio

7. Times interest earned

8. Profit margin ratio

Problem 13-4B (Concluded)

9. Total asset turnover

10. Return on total assets

11. Return on common stockholders' equity

Problem 13-5B (60 minutes)

Part 1

Fargo Company

Ball Company

c. Accounts (and notes) receivable turnover

d. Inventory turnover

e. Days’ sales in inventory

f. Days' sales uncollected

Problem 13-5B (Concluded)

Part 2

Fargo Company

Ball Company

a. Profit margin ratio

b. Total asset turnover

c. Return on total assets

d. Return on common stockholders' equity

e. Price-earnings ratio

f. Dividend yield

Investment analysis: Ball’s profit margin, total asset turnover, return on total

Problem 13-6BA (60 minutes)

Part 1 Effect of income taxes (debits or losses in parentheses)

Pretax

25% Tax

Effect

After-Tax

e. Loss on hurricane damage ......................................................

(64,000)

(16,000)

(48,000)

Part 2 Income from continuing operations (and its components)

c.

Net sales ................................................................

$2,640,000

b.

Interest revenue .............................................................

20,000

j.

Gain from settling lawsuit .............................................

68,000

Total revenues and gains .............................................

2,728,000

Problem 13-6BA (Concluded)

Part 3 Income from discontinued segment

Part 4 Income before extraordinary items

Part 5 Net income