Problem 14-2A The comparative statements of Larker Tool Company are presented be
ID: 2481082 • Letter: P
Question
Problem 14-2A
The comparative statements of Larker Tool Company are presented below.
Larker Tool Company
Income Statement
For the Years Ended December 31
2014
2013
Larker Tool Company
Balance Sheets
December 31
Assets
2014
2013
Liabilities and Stockholders’ Equity
All sales were on account.
Compute the following ratios for 2014. (Weighted-average common shares in 2014 were 59,600.) (Round Earnings per share, Current ratio, and Acid-test ratio to 2 decimal places, e.g.1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8% .)
Larker Tool Company
Income Statement
For the Years Ended December 31
2014
2013
Net sales $1,815,820 $1,745,400 Cost of goods sold 1,007,060 984,840 Gross profit 808,760 760,560 Selling and administrative expense 512,900 472,800 Income from operations 295,860 287,760 Other expenses and losses Interest expense 15,210 13,670 Income before income taxes 280,650 274,090 Income tax expense 83,220 77,250 Net income $ 197,430 $ 196,840Explanation / Answer
Formula Calculation Ans a) Earnings per share Net Income/No.of common shares outstanding (298000/5= 59600 shares 197430/59600 3.31 (b) Return on common stockholders’ equity Net Income/Avg Total stokholder Equity 197430/((534340+456650)/2)*100 39.8 % 495495 (c) Return on assets Net Income/Avg Assets 197430/((939720+848620)/2)*100 22.1 % 0.39845 (d) Current ratio Current assets/Current Liabilities 342920/201380 1.70 :1 (e) Acid-test ratio Current assets-Inventory/Current Liabilities (342920-110590)/201380 1.15 :1 (f) Accounts receivable turnover Credit sales/Average Accounts Receivable 1815820/((104040+101840)/2) 17.6 times (g) Inventory turnover Cost of Goods Sold/Avg Inventory 1007060/((110590+115420)/2) 8.9 times (h) Times interest earned Operating Income/Interest 295860/15210 19.5 times (i) Asset turnover Sales/Avg Assets 1815820/((939720+848620)/2) 2.0 times (j) Debt to total assets Total Liabilities/Total assets 405380/939720*100 43.14 %