Accouting Analysis of Leverage Based on the financial statements of Cowan Kitchen Counters, Inc., as shown below: Cowan Kitchen Counters, Inc. Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2 20-1 Net Sales (all on account) $2,584,000 $2,163,000 Cost of goods sold 1,868,200 1,616,800 Gross profit $715,800 $546,200 Operating expenses 315,200 221,800 Other expense (interest) 24,200 24,200 Income tax expense 176,800 106,300 Net income $199,600 $193,900 Cowan Kitchen Counters, Inc. Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 Cash $255,400 $243,200 Government notes 250,000 250,000 Accounts receivable (net) 903,500 797,500 Merchandise inventory 983,600 913,600 Supplies and prepayments 143,200 47,500 Land 108,200 108,200 Building (net) 330,000 390,600 Office equipment (net) 17,700 15,000 Total assets $2,991,600 $2,765,600 Current liabilities (accounts payable) $703,000 $532,000 Bonds payable 220,000 240,000 Total liabilities $923,000 $772,000 Common stock ($10 par, 180,000 shares) $1,800,000 $1,800,000 Retained earnings 268,600 193,600 Total stockholders' equity $2,068,600 $1,993,600 Total liabilities and stockholders' equity $2,991,600 $2,765,600 Compute the following leverage measures for 20-2 (round all calculations to two decimal places): a. Debt-to-equity ratio fill in the blank 1 to 1 b. Times interest earned ratio (Bond interest is $24,200.) fill in the blank 2 times c. Assets-to-equity ratio fill in the blank 3 to 1

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.5.3MBA

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Accouting

Analysis of Leverage

Based on the financial statements of Cowan Kitchen Counters, Inc., as shown below:

Cowan Kitchen Counters, Inc. Comparative Income Statement For Years Ended December 31, 20-2 and 20-1
	20-2	20-1
Net Sales (all on account)		$2,584,000	$2,163,000
Cost of goods sold		1,868,200	1,616,800
Gross profit		$715,800	$546,200
Operating expenses		315,200	221,800
Other expense (interest)		24,200	24,200
Income tax expense		176,800	106,300
Net income		$199,600	$193,900

Cowan Kitchen Counters, Inc. Comparative Balance Sheet December 31, 20-2 and 20-1
	20-2	20-1
Cash		$255,400	$243,200
Government notes		250,000	250,000
Accounts receivable (net)		903,500	797,500
Merchandise inventory		983,600	913,600
Supplies and prepayments		143,200	47,500
Land		108,200	108,200
Building (net)		330,000	390,600
Office equipment (net)		17,700	15,000
Total assets		$2,991,600	$2,765,600

Current liabilities (accounts payable)		$703,000	$532,000
Bonds payable		220,000	240,000
Total liabilities		$923,000	$772,000

Common stock ($10 par, 180,000 shares)		$1,800,000	$1,800,000
Retained earnings		268,600	193,600
Total stockholders' equity		$2,068,600	$1,993,600
Total liabilities and stockholders' equity		$2,991,600	$2,765,600

Compute the following leverage measures for 20-2 (round all calculations to two decimal places):

a. Debt-to-equity ratio	fill in the blank 1	to 1
b. Times interest earned ratio (Bond interest is $24,200.)	fill in the blank 2	times
c. Assets-to-equity ratio	fill in the blank 3	to 1

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