The comparative statements of Painter Tool Company are presented below. PAINTER
ID: 2416834 • Letter: T
Question
The comparative statements of Painter Tool Company are presented below.
PAINTER TOOL COMPANY Income Statement For the Years Ended December 31 2017 2016
Net sales $1,816,900 $1,754,300
Cost of goods sold 1,012,500 990,000
Gross profit 804,400 764,300
Selling and administrative expenses 517,400 478,800
Income from operations 287,000 285,500
Other expenses and losses Interest expense 17,500 13,000
Income before income taxes 269,500 272,500
Income tax expense 81,400 77,800
Net income $ 188,100 $ 194,700
PAINTER TOOL COMPANY Balance Sheets December 31 Assets 2017 2016
Current assets Cash $59,700 $65,000
Short-term investments 68,400 50,600
Accounts receivable (net) 116,200 101,300
Inventory 123,700 115,500
Total current assets 368,000 332,400
Plant assets (net) 595,100 522,700
Total assets $963,100 $855,100
Liabilities and Stockholders’ Equity Current liabilities Accounts payable $159,000 $144,400
Income taxes payable 43,200 41,500
Total current liabilities 202,200 185,900
Bonds payable 195,300 195,300
Total liabilities 397,500 381,200
Stockholders’ equity Common stock ($5 par) 284,600 304,300
Retained earnings 281,000 169,600
Total stockholders’ equity 565,600 473,900
Total liabilities and stockholders’ equity $963,100 $855,100
All sales were on account.
Compute the following ratios for 2017. (Weighted-average common shares in 2017 were 58,700.) (Round Earnings per share, Current ratio and Acid-test ratio to 2 decimal places, e.g. 1.65 or 1.65:1, and all other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
(a) Earnings per share $
(b) Return on common stockholders’ equity %
(c) Return on assets %
(d) Current ratio :1
(e) Acid-test ratio :1
(f) Accounts receivable turnover times
(g) Inventory turnover times
(h) Times interest earned times
(i) Asset turnover times
(j) Debt to assets ratio %
Explanation / Answer
a. Earnings per share = net income / weighted average common shares = 188,100 / 58,700 = $ 3.20
b. Return on common stockholders' equity = net income / average common stockholders' equity = 188,100 / 519,750 = 36.19%
b. Return on assets = net income / average total assets = 188,100 / 909,100 = 20.69%
d. Current ratio = current assets / current liabilities = 368,000 / 202,200 = 1.82: 1
e. Acid test ratio= (Current assets - inventory) / current liabilities = 244,300 / 202,200 = 1.21:1
f. Accounts receivable turnover = Net sales / average accounts receivable = 1,816,900 / 108,750 = 16.71 times
g. Inventory turnover = cost of goods sold / average inventory = 1,012,500 / 119,600 = 8.47 times
h. Times interest earned = income from operations / interest expense = 287,000 / 17,500 = 16.4 times
i. Asset turnover = Net sales / Average total assets = 1,816,900 / 909,100 = 2 times
j. Debt to assets ratio = Total liabilities / Total assets = 397,500 / 963,100 = 41.27%