Ch. 13 problem 13-4a Question Details Selected year-end financial statements of
ID: 2443022 • Letter: C
Question
Ch. 13 problem 13-4aQuestion Details
Selected year-end financial statements of Cadet Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2008, were inventory, $56,900; total assets, $219,400; common stock, $85,000; and retained earnings, $52,348.)
CADET CORPORATION
Income Statement
For Year Ended December 31, 2009
Sales $456,600
Cost of goods sold
297,450
Gross profit 159,150
Operating expenses 99,400
Interest expense
3,900
Income before taxes 55,850
Income taxes
22,499
Net income
$33,351
CADET CORPORATION
Balance Sheet
December 31, 2009
Assets Liabilities and Equity
Cash $20,000 Accounts payable $21,500
Short-term investments 8,200 Accrued wages payable 4,400
Accounts receivable, net 29,400 Income taxes payable 3,700
Notes receivable (trade)* 7,000 Long-term note payable, secured by mortgage on plant assets 67,400
Merchandise inventory 34,150 Common stock 85,000
Prepaid expenses 2,700 Retained earnings
66,750
Plant assets, net
147,300
Total liabilities and equity
$248,750
Total assets
$248,750
* These are short-term notes receivable arising from customer (trade) sales.
Required:
Compute the following: (Do not round interim calculations. Round your answers to 1 decimal place. Omit the "%" sign in your response.)
1. Current ratio to
2. Acid-test ratio to
3. Days' sales uncollected days
Explanation / Answer
1. Current Ratio= Current Assets/Current Liabilities Current Assets: Cash $20,000 Short-term Investments 8,200 Accounts Receivables 29,400 Net Receivable (short term) 7,000 Merchandise inventory 34,150 Pre-paid expenses 2,700 Total Current Assets 101,450 Current Liablitites: Accounts Payable 21,500 Accrued wages payable 4,400 Income tax payable 3,700 Total Current Liabilities 29,600 Current Ratio = Current Assets/Current Liabilities 101,450/29,600 3.427 Current Ratio= 3.43 2.Acid-Test Ratio= Quick Assets/Current Liablities Quick Assets= Current Assets-Inventory Quick Assets=101,450-34,150=67,300 Quick or Acid Test Ratio= 67,300/29,600 Acid Test Ratio 2.27 3.Days sales uncollected days Average Daily Sales= Net Sales/365 days Average Daily Sales=456,600/365 1,250.95 1,251 Average Accounts Receivable= 29,400 + 7,000=36,400 Sales on account include notes receivable as well as accounts receivable, notes and accounts receivables are normally combined for analysis. notes and accounts receivables are normallly combined for analysis. Number of Days' Sales in Receivables=Average Accounts Receivable/Average Daily Sales Number of Days' Sales uncollected days=36,400/1,251 29.09