Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 9, Problem P9.41BPGB
Using ratio data to evaluate a company’s financial position
Leaming Objective 5
1. Days’ sales in receivables (2018) 18 days
The comparative ?nancial statements of Newton Cosmetic Supply for 2018, 2017 and 2016 include the data shown here:
| 2018 | 2017 | 2016 | |
| Current Assets: | |||
| Cash | $ 80,000 | $50,000 | $20,000 |
| Short-term investment | 150,000 | 170,000 | 125,000 |
| Accounts Receivable, Net | 310,000 | 260,000 | 220,000 |
| Merchandise Inventory | 360,000 | 335,000 | 330,000 |
| Prepaid Expenses | 50,000 |
30,000 |
35,000 |
| Total Current Assets | 950,000 | 345,000 | 740,000 |
| Total Current Liabilities | 530,000 | 630,000 | 670,000 |
| Income statement—partial | |||
| Net Sales (all on account) | 5,850,000 | 5,110,000 | 425,000 |
Requirements
1. Compute these ratios for 2018 and 2017:
a. Acid-test ratio (Round to two decimals.)
b. Accounts receivable turnover (Round to two decimals.)
c. Days‘ sales in receivables (Round to the nearest whole day.)
2. Considering each ratio individually, which ratios improved from 2017 to 2018 and which ratios deteriorated? ls the trend favorable or unfavorable for the company?
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Problem I. The following data represent selected information from the comparative income statement and balance sheet for Little CPA Company for the years ended December 31, 2020 and 2019:
2020
2019
Net Sales (all on credit)
P370,000
P333,000
Cost of goods sold
160,000
150,000
Gross profit
210,000
183,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
Cash
10,000
14,000
Accounts receivable, net
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
86,000
Total noncurrent assets
112,000
104,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Ordinary share capital, no par*
60,000
60,000
Retained earnings
30,000
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Note: 10,000 ordinary shares have been issued and outstanding since the company was established. They had a…
Problem I. The following data represent selected information from the comparative income statement and balance sheet for Little CPA Company for the years ended December 31, 2020 and 2019:
2020
2019
Net Sales (all on credit)
P370,000
P333,000
Cost of goods sold
160,000
150,000
Gross profit
210,000
183,000
Income from operations
95,000
87,000
Interest expense
8,000
8,000
Net income
70,000
57,000
Cash
10,000
14,000
Accounts receivable, net
30,000
25,000
Inventory
43,000
40,000
Prepaid expenses
5,000
7,000
Total current assets
88,000
86,000
Total noncurrent assets
112,000
104,000
Total current liabilities
70,000
60,000
Total noncurrent liabilities
40,000
45,000
Ordinary share capital, no par*
60,000
60,000
Retained earnings
30,000
25,000
Note: 10,000 ordinary shares have been issued and outstanding since the company was established. They had a…
1. Use ratios to analyze a company's liquidity and solvency.
Calculate Select Ratios - Excel
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1 Condensed financial statements for Games Galore are summarized below:
2
3 Balance Sheet
2016
2015
185,000 $
80,000
4 Cash
$
143,000
59,000
134,000
5 Accounts Receivable, Net
6 Inventory
104,000
7 Prepaid Insurance
11,900
5,880
Total Current Assets
380,900
341,880
9 Property and Equipment, Net
514,500
407,000
10
Total Assets
$
895,400 $
748,880
11
12 Current Liabilities
2$
85,300 $
96,800
13 Long-term Liabilities
284,000
224,000
Total Liabilities
369,300
299,000
320,800
299,000
14
15 Contributed Capital
16 Retained Earnings
Total Stockholders' Equity
227,100
129,080
428,080
17
526,100
18
Total Liabilities and Stockholders' Equity
$
895,400 $
748,880
19
20 Income Statement
$ 3,031,000…
Chapter 9 Solutions
Horngren's Accounting (12th Edition)
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