Please include all steps The financial statements for Castile Products, Inc. are
ID: 2471627 • Letter: P
Question
Please include all steps
The financial statements for Castile Products, Inc. are given below: Castile Products, Inc. Balance Sheet December 31 Assets Current assets 22,000 Cash 240,000 Accounts receivable, net Merchandise inventory 390.000 Prepaid expenses 9,000 Total current assets 661,000 Property and equipment, net 890,000 $1,551,000 Total assets Liabilities and Stockholders' Equity Liabilities 250.000 Current liabilities Bonds payable, 9% 330,000 Total liabilities 580,000 Stockholders' equity s 190,000 Common stock, $5 par value Retained earnings 781,000 Total stockholders' equity 971,000 Total liabilities and stockholders' equity $1,551,000 Castile Products, Inc. ncome Statement For the Year Ended December 31 Sales $2,260,000 Cost of goods sold 1.250,000 1,000,000 Gross margin 630,000 Selling and administrative expenses Net operating income 370,000 Interest expense 29,700 Net income before taxes 340,300 ncome taxes (30% 102,090 Net income S 238,210 Account balances at the beginning of the year were: accounts receivable, S180,000; and inventory, S250,000. All sales were on account. Assets at the beginning of the year totaled S1,050,000, and the stockholders' equity totaled S585,000.Explanation / Answer
Part 1)
Gross margin percentage is the ratio of gross profit to net sales. It can be calculated with the use of following formula:
Gross Margin = Gross Profit/Net Sales*100
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Using the values provided in the question, we get,
Gross Margin = 1,000,000/2,260,000*100 = 44.25%
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Part 2)
Net margin percentage is the ratio of net profit to net sales. It can be calculated with the use of following formula:
Net Margin = Net Profit/Net Sales*100
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Using the values provided in the question, we get,
Net Margin = 238,210/2,260,000*100 = 11%
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Part 3)
Return on total assets can be calculated with the use of following formula:
Return on Total Assets = Net Income/Average Total Assets*100
where Average Total Assets = (Opening Assets + Closing Assets)/2
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Using the values provided in the question, we get,
Return on Total Assets = 238,210/(1,060,000 + 1,551,000)/2 = 18.2%
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Part 4)
Return on equity can be calculated with the use of following formula:
Return on Equity = Net Income/Average Shareholder's Equity*100
where Average Total Assets = (Opening Shareholder's Equity + Closing Shareholder's Equity)/2
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Using the values provided in the question, we get,
Return on Equity = 238,210/(685,000 + 971,000)/2 = 28.8%