Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Chapter 14, Problem 14.2DI
(a) Current ratio
To determine
Inventory Turnover: It is a part of efficiency ratios used during the process of ratio analysis. It reflects the number of times a company’s inventory is converted into sale during a particular period. The cost of goods sold is divided by average inventory to get the value of inventory turnover.
Profit Margin: Profit margin reflects the portion of net income in the net sales. It is a profitability measure tool that is used to evaluate the net income a business earns on every dollar of net sales. It is computed as net income divided by net revenue.
Return on Total Assets: It is a measure to evaluate the efficiency of company’s assets. It reports the profit earned as the percentage of total assets used in the business. A company’s
The rate of Return on Common
Debt to Assets Ratio: It is the ratio between total assets of the company and the total liabilities. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.
Times Interest Earned Ratio: It’s a measure to evaluate the net income for interest payment on the debt of a company. It is a part of solvency ratios.
To compute: Current ratio for 2016 and 2017.
(b)
To determine
To compute: Inventory turnover
(c)
To determine
To compute: Profit margin
(d)
To determine
To compute: Return on assets
(e)
To determine
To compute: Return on common stockholder’s equity
(f)
To determine
To compute: Debt to assets ratio
(g)
To determine
To compute: Times interest earned
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The condensed financial statements of Underwood Company for the years 2017 and 2018 are presented as follows. (Amounts in thousands.)
UNDERWOOD COMPANYBalance SheetsDecember 31
2018
2017
Current assets
Cash and cash equivalents
$330
$360
Accounts receivable (net)
470
400
Inventory
460
390
Prepaid expenses
120
160
Total current assets
1,380
1,310
Investments
10
10
Property, plant, and equipment
420
380
Intangibles and other assets
530
510
Total assets
$2,340
$2,210
Current liabilities
$900
$790
Long-term liabilities
410
380
Stockholders’ equity—common
1,030
1,040
Total liabilities and stockholders’ equity
$2,340
$2,210
UNDERWOOD COMPANYIncome StatementsFor the Years Ended December 31
2018
2017
Sales revenue
$3,800
$3,460
Costs and expenses
Cost of goods sold
955
890
Selling & administrative expenses…
The condensed financial statements of Soule Company for the years 2013 and 2014 are presented below.
Soule Company
Balance Sheets (in EUR)
December 31
2014 2013
Current Assets
Cash and cash equivalents 330 360
Accounts receivable (net) 470 433
Invnetory 430 390
Prepaid expenses 120 160
Total Current Assets 1,350 1,343
Property, plant, and equipment 420 380
Investments 10 10
Intangibles and other assets 530 510
Total Assets 2,310 2,243
Current Liabilities 900 810
Long-term liabilities 390 393
Stockholders' equity - common 1,020 1,040
Total liabilities and stockholders' equity 2,310 2,243
Soule Company
Income Statements
For the year ended December 31
2014 2013
Sales revenue 4,000 3,600
Cost and expenses
Cost of goods sold 984 895
Selling and administrative expenses 2,400 2,330
Internet expenses 10 20
Total costs and expenses 3,394 3,245
Income before income taxes 606 355
Income tax expense 242 142
Net income 364 213
Compute the current ratio for year 2014.
The condensed financial statements of Marks Company for the years 2017-2018 are presented below:
Marks CompanyComparative Balance SheetsAs of December 31, 2017 and 2018
2018
2017
Cash
$404,000
$155,000
Accounts receivable (net)
356,000
300,000
Inventories
375,000
339,000
Plant and equipment
1,830,000
1,121,000
Accumulated depreciation
(260,000
)
(193,000
)
$2,705,000
$1,722,000
Accounts payable
$339,000
$164,000
Dividends payable
-0-
45,000
Bonds payable
405,000
-0-
Common stock ($10 par)
1,521,000
1,230,000
Retained earnings
440,000
283,000
$2,705,000
$1,722,000
Additional data:
Market value of stock at 12/31/18 is $80 per share.
Marks sold 30,000 shares of common stock at par on July 1, 2018.
Marks CompanyCondensed…
Chapter 14 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 14 - (a) Jose Ramirez believes that the analysis of...Ch. 14 - (a) Distinguish among the following bases of...Ch. 14 - Prob. 3QCh. 14 - Prob. 4QCh. 14 - Prob. 5QCh. 14 - Prob. 6QCh. 14 - Prob. 7QCh. 14 - What do the following classes of ratios measure?...Ch. 14 - What is the difference between the current ratio...Ch. 14 - Hizar Company, a retail store, has an accounts...
Ch. 14 - Which ratios should be used to help answer the...Ch. 14 - The price-earnings ratio of General Motors...Ch. 14 - What is the formula for computing the payout...Ch. 14 - Holding all other factors constant, indicate...Ch. 14 - Prob. 15QCh. 14 - Prob. 16QCh. 14 - Prob. 17QCh. 14 - Prob. 18QCh. 14 - Prob. 19QCh. 14 - Why is it important to report discontinued...Ch. 14 - You are considering investing in Wingert...Ch. 14 - Prob. 22QCh. 14 - Prob. 23QCh. 14 - You recently received a letter from your Uncle...Ch. 14 - Prob. 14.2BECh. 14 - Using the following data from the comparative...Ch. 14 - Using the same data presented above in BE14-3 for...Ch. 14 - Net income was 500,000 in 2016, 450,000 in 2017,...Ch. 14 - Prob. 14.6BECh. 14 - Prob. 14.7BECh. 14 - Prob. 14.8BECh. 14 - Prob. 14.9BECh. 14 - Prob. 14.10BECh. 14 - The following data are taken from the financial...Ch. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - On June 30. Holloway Corporation discontinued its...Ch. 14 - Prob. 14.1DICh. 14 - Prob. 14.2DICh. 14 - In its proposed 2017 income statement. Hrabik...Ch. 14 - Financial information for Kurzen Inc. is presented...Ch. 14 - Operating data for Navarro Corporation are...Ch. 14 - The comparative condensed balance sheets of Gurley...Ch. 14 - The comparative condensed income statements of...Ch. 14 - Suppose Nordstrom, Inc., which operates department...Ch. 14 - Keener Incorporated had the following transactions...Ch. 14 - Frizell Company has the following comparative...Ch. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Wiemers Corporations comparative balance sheets...Ch. 14 - Prob. 14.12ECh. 14 - Prob. 14.13ECh. 14 - Comparative statement data for Farris Company and...Ch. 14 - The comparative statements of Painter Tool Company...Ch. 14 - Prob. 14.3APCh. 14 - Financial information for Messersmith Company is...Ch. 14 - Prob. 14.5APCh. 14 - Prob. 14.6APCh. 14 - Prob. 14.7APCh. 14 - Prob. 14.8APCh. 14 - Prob. 14.9APCh. 14 - Financial Reporting Problem: Apple Inc. Your...Ch. 14 - PepsiCos financial statements are presented at...Ch. 14 - Prob. 14.3BYPCh. 14 - As the CPA for Gandara Manufacturing Inc., you...Ch. 14 - The Management Discussion and Analysis section of...Ch. 14 - Prob. 14.6BYPCh. 14 - Dave Schonhardt, president of Schonhardt...
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