Chapter 2: 3DQ (page 74)
If the accounts receivable turnover ratio is decreasing, what will be happening to the average collection period?
When the account receivable turnover ratio decreases, the average collection period increases.
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Given the following information, prepare an income statement for Jonas Brothers Cough Drops.
Selling and administrative expenses | $328,000 |
Depreciation expenses | 195,000 |
Sales | 1,660,000 |
Interest expenses | 129,000 |
Cost of goods sold | 560,000 |
Taxes | 171,000 |
Is there any validity in rule-of-thumb ratios for all corporations, such asa current ratio of 2 to 1 or debt to assets of 50 percent?
Arrange the following items in proper balance sheet presentation:
Accumulated depreciation | \(309,000 |
Retained earnings | 187,000 |
Cash | 14,000 |
Bonds payable | 136,000 |
Accounts receivable | 54,000 |
Plant and equipment – original cost | 775,000 |
Accounts payable | 35,000 |
Allowance for bad debts | 9,000 |
Common stock, \)1 par, 100,000 share outstanding | 100,000 |
Inventory | 70,000 |
Preferred stock, $59 par, 1,000 share outstanding | 59,000 |
Marketable securities | 24,000 |
Investments | 20,000 |
Notes payable | 34,000 |
Capital paid in excess of par (common stock) | 88,000 |
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.
Jerry Rice and Grain Stores has \(4,780,000 in yearly sales. The firm earns 4.5 percent on each dollar of sales and turns over its assets 2.7 times per year. It has \)123,000 in current liabilities and $349,000 in long-term liabilities.
a. What is its return on stockholders’ equity?
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