SURVEY OF ACCOUNTING W/CODE
5th Edition
ISBN: 9781260716252
Author: Edmonds
Publisher: MCG
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Chapter 9, Problem 8E
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Brief Exercise 9-3 (Algo) Ratio analysis LO 9-3
The balance sheet for Alpha Corporation follows:
Current assets
Long-term assets (net)
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Common stock and retained earnings
Total liabilities and stockholders' equity
Debt-to-assets ratio
Debt-to-equity ratio
$998,000
1,508,000
2,506,000
Required:
Compute the debt-to-assets and debt-to-equity ratios using the provided balance sheet.
Note: Round your final answers to 1 decimal place.
%
704,000
1,104,000
1,808,000
698,000
$2,506,000
Exercise 15-20
Presented below is information from the annual report of Emporia Plastics, Inc.
Operating income
$532,150
Bond interest expense
135,000
397,150
Income taxes
183,432
Net income
$213,718
Bonds payable
$1,000,000
Common stock
875,000
Retained earnings
375,000
(a) Compute the return on common stockholders’ equity and the rate of interest paid on bonds. (Assume balances for debt and equity accounts approximate averages for the year.) (Round answers to 1 decimal place, e.g. 16.8%.)
Rate of return on common stock equity
%
Rate of interest paid on bonds payable
%
(b) Is Emporia Plastics, Inc. trading on the equity successfully?
Yes or No
Knowledge Check 01
Total Assets for a company are $700,000: Accounts Payable is $75,000, Bonds Payable is $225,000; Common Stock is $300,000 and
Retained Earnings is $100,000. The common-size percent for Accounts Payable is
0933%
0933.3%
- 10.7%
- 100.7%
Chapter 9 Solutions
SURVEY OF ACCOUNTING W/CODE
Ch. 9 - 1. Why are ratios and trends used in financial...Ch. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - 4. What is the significance of inventory turnover,...Ch. 9 - 5. What is the difference between the current...Ch. 9 - Prob. 6QCh. 9 - Prob. 7QCh. 9 - Prob. 8QCh. 9 - 9. What are some limitations of the earnings per...Ch. 9 - Prob. 10Q
Ch. 9 - Prob. 11QCh. 9 - Prob. 12QCh. 9 - Prob. 13QCh. 9 - Prob. 14QCh. 9 - Exercise 9-1 Horizontal analysis Winthrop...Ch. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Prob. 4ECh. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Comprehensive analysis The December 31, 2019,...Ch. 9 - Prob. 10ECh. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Ratio analysis Compute the specified ratios using...Ch. 9 - Prob. 14ECh. 9 - LO 13-2, 13-3, 13-4, 13-5 Exercise 13-15A...Ch. 9 - Prob. 16PCh. 9 - Prob. 17PCh. 9 - Prob. 18PCh. 9 - Prob. 19PCh. 9 - Prob. 20PCh. 9 - Problem 9-21 Ratio analysis Selected data for...Ch. 9 - Prob. 22PCh. 9 - Problem 9-23 Ratio analysis The following...Ch. 9 - Prob. 24PCh. 9 - Prob. 1ATCCh. 9 - Prob. 3ATCCh. 9 - ATC 9-5 Ethical Dilemma Making the ratios look...
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- RATIO ANALY SIS OF COMPARATI VE FIN ANCIAL STATE MENT S Refer to the financial statements in Problem 24-8B. REQUIRED Calculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places). (a) Return on assets (Total assets on January 1, 20-1, were 111,325.) (b) Return on common stockholders equity (Total common stockholders equity on January 1, 20-1, was 82,008.) (c) Earnings per share of common stock (The average numbers of shares outstanding were 6,300 shares in 20-1 and 6,900 in 20-2.) (d) Book value per share of common stock (e) Quick ratio (f) Current ratio (g) Working capital (h) Receivables turnover and average collection period (Net receivables on January 1, 20-1, were 28,995.) (i) Merchandise inventory turnover and average number of days to sell inventory (Merchandise inventory on January 1, 20-1, was 32,425.) (j) Debt-to-equity ratio (k) Asset turnover (Assets on January 1, 20-1, were 111,325.) (l) Times interest earned ratio (m) Profit margin ratio (n) Assets-to-equity ratio (o) Price-earnings ratio (The market price of the common stock was 120.00 and 110.00 on December 31, 20-2 and 20-1, respectively.)arrow_forwardMeasures of liquidity, solvency, and profitability The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was 82.60 on December 31, 20Y2. Marshall Inc. Comparative Retained Earnings Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained earnings, January 1........... 3,704,000 3,264,000 Net income.................... 600,000 550,000 Total....................... 4,304,000 3,814,000 Dividends: On preferred stock.............. 10,000 10,000 On common stock............ 100,000 100,000 Total dividends............... 110,000 110,000 Retained earnings, December 31..... 4,194,000 3,704,000 Marshall Inc. Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales..................... 10,850,000 10,000,000 Cost of goods sold......... 6,000,000 5,450,000 Gross profit............... 4,850,000 4,550,00 Selling expenses.......... 2,170,000 2,000,000 Administrative expenses... 1,627,500 1.500,000 Total operating expenses .. 3,797,500 3,500,000 Income from operations ... 1,052,500 1,050,000 Other revenue............ 99,500 20,000 1,152,000 1,070,000 Other expense (interest)... 132,000 120,000 Income before income tax . 1,020,000 950,000 Income tax expense....... 420,000 400.000 Net income............... 600,000 550,000 Marshall Inc. Comparative Balance Sheet December 31,20Y2 and 20Y1 20Y2 20Y1 Assets Current assets: Cash.......................................................... 1,050,000 950,000 Marketable securities........................................... 301,000 420,000 Accounts receivable (net)....................................... 585,000 500,000 Inventories.................................................... 420,000 380,000 Prepaid expenses.............................................. 108,000 20,000 Total current assets.......................................... 2,464,000 2,270,000 Long-term investments............................................ 800.000 800,000 Property, plant, and equipment (net)............................... 5,760,000 5,184,000 Total assets....................................................... 9,024,000 8,254,000 Liabilities Current liabilities.................................................. 880,000 800,000 Long-term liabilities: Mortgage note payable, 6%.............. 200,000 0 Bonds payable, 4%............................................. 3,000,000 3,000,000 Total long-term liabilities.................................... 3,200,000 3,000,000 Total liabilities.................................................... 4,080,000 3,800,000 Stockholders' Equity Preferred 4% stock, 5 par......................................... 250,000 250,000 Common stock, 5 par............................................. 500,000 500,000 Retained earnings................................................. 4,194,000 3,704,000 Total stockholders' equity.......................................... 4,944.000 4,454,000 Total liabilities and stockholders' equity............................. 9,024.000 8,254,000 Instructions Determine the following measures for 20Y2, rounding to one decimal place, including percentages, except for per-share amounts: 1. Working capital 2. Current ratio 3 Quick ratio 4. Accounts receivable turnover 5. Number of days sales in receivables 6. Inventory turnover 7. Number of days sales in inventory 8. Ratio of fixed assets to long-term liabilities 9. Ratio of liabilities to stockholders equity 10. Times interest earned 11. Asset turnover 12. Return on total assets 13. Return on stockholders equity 14. Return on common stockholders equity 15. Earnings per share on common stock 16. Price-earnings ratio 17. Dividends per share of common stock 18. Dividend yieldarrow_forwardCommon stockholders' profitability analysis A company reports the following: Net income 1,000,000 Preferred dividends 50,000 Average stockholders' equity 6,250,000 Average common stockholders' equity 3,800,000 Determine (A) the return on stockholders equity and (B) the return on common stockholders' equity. (Round percentages to one decimal place.)arrow_forward
- RATIO ANALYSIS OF COMPARATIVE FINANCIAL STATEMENTS Refer to the financial statements in Problem 24-8B. REQUIRED Calculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places). (a) Return on assets (Total assets on January 1, 20-1, were 111,325.) (b) Return on common stockholders equity (Total common stockholders equity on January 1,20-1, was 82,008.) (c) Earnings per share of common stock (The average numbers of shares outstanding were 6,300 shares in 20-1 and 6,900 in 20-2.) (d) Book value per share of common stock (e) Quick ratio (f) Current ratio (g) Working capital (h) Receivables turnover (Net receivables on January 1, 20-1, were 28,995.) (i) Merchandise inventory turnover (Merchandise inventory on January 1, 20-1, was 32,425.) (j) Debt-to-equity ratio (k) Asset turnover (Assets on January 1,20-1, were 111,325.) (l) Times interest earned ratio (m) Profit margin ratio (n) Assets-to-equity ratio (o) Price-earnings ratio (The market price of the common stock was 120.00 and 110.00 on December 31, 20-2 and 20-1, respectively.)arrow_forward17 continue 17..... The following information pertains to Sheridan Company: Cash $21,500 Accounts receivable 125,000 Inventory 75,500 Plant assets (net) 384,000 Total assets $606,000 Accounts payable $74,500 Accrued taxes and expenses payable 25,500 Long-term debt 48,500 Common stock ($10 par) 155,000 Paid-in capital in excess of par 89,500 Retained earnings 213,000 Total equities $606,000 Net sales (all on credit) $801,000 Cost of goods sold 601,500 Net income 81,500 Please answers these subparts (g) Profit margin on sales % (h) Return on common stockholders’ equity %arrow_forwardVertical Analysis of Balance Sheet Balance sheet data for Kwan Company on December 31, the end of two recent fiscal years, follow: Current Year Previous Year Current assets $355,300 $211,680 Property, plant, and equipment 543,400 509,600 Intangible assets 146,300 62,720 Current liabilities 188,100 94,080 Long-term liabilities 428,450 321,440 Common stock 104,500 109,760 Retained earnings 323,950 258,720 Prepare a comparative balance sheet for both years, stating each asset as a percent of total assets and each liability and stockholders' equity item as a percent of the total liabilities and stockholders' equity. If required, round percentages to one decimal place. Kwan Company Comparative Balance Sheet For the Years Ended December 31 Current Current year year Amount Percent Previous Previous year year Amount Percent Current assets $355,300 $211,680 % Property, plant, and equipment 543,400 509,600 % Intangible assets % 146,300 62,720 % % %arrow_forward
- Problem 4 EINANCIAL RATIOS. The Format Company reports the following balance sheet data: Current liabilities $280.000 Bonds payable, 16% $120,000 Preferred stock, 14%, $100 par value $200,000 Common stock $25 par value, 16.800 shares $420.000 Paid-in capital on common stock $240,000 re Retained earnings $180,000 Income before taxes is $160,000. The tax rate is 40 percent. Common stockholders' equity in the previous year was $800,000. The market price per share of common stock is $35. Requirement: Calculate the following: a. Net income%3B b. Preferred dividends; c. Return on common stock; d. Times interest earned; e. Earnings per share; f. Price/earnings ratio; and g. Book value per share. data relative toarrow_forwardProblem 4 EINANCIAL RATIOS. The Format Company reports the following balance sheet data: Current liabilities $280.000 Bonds payable, 16% $120,000 Preferred stock, 14%, $100 par value $200,000 Common stock $25 par value, 16.800 shares $420.000 Paid-in capital on common stock $240,000 re Retained earnings $180,000 Income before taxes is $160,000. The tax rate is 40 percent. Common stockholders' equity in the previous year was $800,000. The market price per share of common stock is $35. Requirement: Calculate the following: a. Net incomne; t. Preferred dividends; t. Retu d Timec interect carnad: on Stock On comI E. Earings per Shar ingo g. Book value share. Price/Carm ratio and per data relative toarrow_forwardProblem 4 FINANCIAL RATIOS. The Format Company reports the following balance sheet data: heet Current liabilities $280.000 Bonds payable. 16% Preferred stock, 14%, $100 par value $120,000 $200,000 Common stock $25 par value. 16.800 shares $420,000 Paid-in capital on common stock $240,000 ative Retained earnings $180,000 Income before taxes is $160,000. The tax rate is 40 percent. Common stockholders' equity in the previous year was $800,000. The market price per share of common stock is $35. Requirement: Calculate the following: a. Net income; b. Preferred dividends; c. Return on common stock3; d. Times interest earned3; e. Earnings per share; f. Price/earnings ratio; and g. Book value per share.arrow_forward
- Problem 4 EINANCIAL RATIOS. The Format Company reports the following balance sheet data: Current liabilities $280.000 Bonds payable, 16% $120,000 Preferred stock, 14%, $100 par value $200,000 Common stock $25 par value, 16.800 shares $420.000 Paid-in capital on common stock $240,000 re Retained earnings $180,000 Income before taxes is $160,000. The tax rate is 40 percent. Common stockholders' equity in the previous year was $800,000. The market price per share of common stock is $35. Requirement: Calculate the following: a. Net incomne; t. Preferred dividends; L, Return on common stock, d. Times interest earned; e. Earnings per share; f. Price/earnings ratio; and g. Book value per share. Pnol data relative toarrow_forwardCurrent Attempt in Progress Here is financial information for Sunland Inc. Current assets Plant assets (net) Current liabilities Long-term liabilities Common stock, $1 par Retained earnings December 31, 2022 $124,600 394,272 89,568 127,977 166,656 134,671 December 31, 2021 $100,000 333,000 72,000 87,000 112,000 162,000 Prepare a schedule showing a horizontal analysis for 2022, using 2021 as the base year. (Enter negative amounts and percentages using either a negative sign preceding the number e.g. -45, -45% or parentheses e.g. (45), (45%). Round percentages to 1 decimal place, e.g. 12.3%.)arrow_forwardChapter 14 Homework The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2. Comparative Retained Earnings StatementFor the years ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Retained Earnings, Jan. 1 3,704,000 3,264,000 Net Income 600,000 550,000 Dividends: On Preferred Stock (10,000) (10,000) On Common Stock (100,000) (100,000) Increase in Retained Earnings 490,000 440,000 Retained Earnings, Dec. 31 4,194,000 3,704,000 Comparative Income StatementFor the years ended December 31, 20Y2 and 20Y1 20Y2 20Y1 Sales 10,850,000 10,000,000 Cost of goods sold (6,000,000) (5,450,000) Gross Profit 4,850,000 4,550,000 Selling Expenses (2,170,000) (2,000,000) Administrative Expenses (1,627,500) (1,500,000) Total Operating Expenses (3,797,500) (3,500,000) Operating…arrow_forward
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