Accounting Paper 3

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Ex. 118 A comparative balance sheet for Joseph Corporation is presented below: JOSEPH CORPORATION Comparative Balance Sheet 2002 2001 Assets Cash $ 51,000 $ 31,000 Accounts receivable (net) 75,000 60,000 Prepaid insurance 22,000 17,000 Land 22,000 40,000 Equipment 70,000 60,000 Accumulated depreciation (20,000) (13,000) Total Assets $220,000 $195,000 Liabilities and Stockholders ' Equity Accounts payable $ 13,000 $ 6,000 Bonds payable 30,000 19,000 Common stock 140,000 115,000 Retained earnings 37,000 55,000 Total liabilities and stockholders ' equity $220,000 $195,000 Additional information: 1. Net loss for 2002 is $14,000. 2. Cash dividends of $4,000 were declared and paid in…show more content…
Inventory Turnover = ————————— Average inventory $400,000 = ———— $100,000 = 4 times Ex. 125 Selected data from Oates Company are presented below: Total assets $1,600,000 Average assets 1,750,000 Net income 245,000 Net sales 1,225,000 Average common stockholders ' equity 1,000,000 Instructions Calculate the profitability ratios that can be computed from the above information. Solution 125 (9–13 min.) With the information provided, the profitability ratios that can be calculated are as follows: 1. Profit margin = Net income ÷ Net sales = $245,000 ÷ $1,225,000 = 20% Solution 125 (cont.) 2. Asset turnover = Net sales ÷ Average assets = $1,225,000 ÷ $1,750,000 = 70% 3. Return on assets = Net income ÷ Average assets = $245,000 ÷ $1,750,000 = 14% Net income 4. Return on common stockholders ' equity = ————————————————— Average common stockholders ' equity = $245,000 ÷ $1,000,000 = 24.5% Ex. 126 The following data are taken from the financial statements of Doyle Company: 2002 2001 Monthly average accounts receivable $ 520,000 $ 500,000 Net sales on account 5,200,000 4,500,000 Terms for all sales are 2/10, n/30 Instructions (a) Compute the receivables turnover and the average collection period for both years. (b) What conclusion can an analyst draw about the management of

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