Information is limited. Profit margin on sales= 5%, Return on assets= 7.5%, Gros
ID: 2385073 • Letter: I
Question
Information is limited. Profit margin on sales= 5%, Return on assets= 7.5%, Gross profit margin= 40%, Inventory turnover ratio+ 6 times, Receivables turnover ratio= 25, acid-test ratio= .9, current ratio= 2 to 1, Return on shareholders' equity = 10 %, debt to equity ratio = 1/3, Times interest earned ratio = 12 times.Net income $15,000, one short-term note ($5,000): all other current liabilities, the effective interest rate on short-term notes and bonds is 8%, no investment securities, cash balance totals $15,000.
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Explanation / Answer
Here's a sample balance sheet: http://www.accountingcoach.com/online-accounting-course/05Xpg04.html Just plug in the values. Feel free to copy-paste that sheet! For example, cash (under assets) = $15,000 Under assets, you see "investment securities". Since you don't have any investment, that's 0. Under liabilities, you see "interest payable" - that's ($15,000 - $5,000)(0.08) = $10,000 x 0.08 = $800 Just go line-by-line and fill in the information. That's it!