Chapter 2: 19BP (page 81)
Martin Electronics has an accounts receivable turnover equal to 15 times. If accounts receivable are equal to $80,000, what is the value for average daily credit sales?
The average daily credit sales is $3,288.
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Baker Oats had an asset turnover of 1.6 times per year.
b. The following year, on the same level of assets, Baker’s assets turnoverdeclined to 1.4 times and its profit margin was 8 percent. How did the returnon total assets change from that of the previous year?
Precision Systems had sales of \(820,000, cost of goods of \)510,000, selling and administrative expense of \(60,000, and operating profit of \)103,000. What was the value of depreciation expense? Set this problem up as a partial income statement and determine depreciation expense as the “plug” figure required to obtain the operating profit.
The balance sheet for Stud Clothiers is shown below. Sales for the year were \(2,400,000, with 90 percent of sales sold on credit.
Stud Clothier | |||
Balance sheet 20X1 | |||
Assets | Liabilities and Equity | ||
Cash | \)60,000 | Account payable | \(220,000 |
Account receivable | 240,000 | Accrued taxes | 30,000 |
Inventory | 350,000 | Bonds payable (long term) | 150,000 |
Plant and equipment | 410,000 | Common stock | 80,000 |
Paid in capital | 200,000 | ||
Retained earnings | 380,000 | ||
Total assets | \)1,060,000 | Total LIbilities and Equity | $1,060,000 |
Compute the following:
b. Quick ratio.
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
b. The fixed charge coverage.
Times mirror and glass company | |
Sales | \(126,000 |
Less: Cost of goods sold | 93,000 |
Gross profit | \)33,000 |
Less: selling and administrative expenses | 11,000 |
Lease Expenses | 4,000 |
Operating profit* | \(18,000 |
Less: Interest expenses | 3,000 |
Earning before taxes | \)15,000 |
Less: Taxes (30%) | 4,500 |
Earning after taxes | $10,500 |
*equal income before interest and taxes
Classify the following balance sheet items as current or noncurrent:
Retained earning | Bond payable |
Accounts payable | Accrued wages payable |
Prepaid expenses | Accounts receivable |
Plant and equipment | Capital in excess of par |
Inventory | Preferred stock |
Common stock | Marketable security |
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