The comparative financial statements of Marshall Inc. are as follows. The market
ID: 2517742 • Letter: T
Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.40 on December 31, 20Y2.
Question not attempted.
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Retained earnings, January 1
$3,712,000.00
$3,262,000.00
3
Net income
631,000.00
560,000.00
4
Total
$4,343,000.00
$3,822,000.00
5
Dividends:
6
On preferred stock
$10,000.00
$10,000.00
7
On common stock
100,000.00
100,000.00
8
Total dividends
$110,000.00
$110,000.00
9
Retained earnings, December 31
$4,233,000.00
$3,712,000.00
Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Sales
$10,860,000.00
$10,000,000.00
3
Cost of goods sold
6,000,000.00
5,440,000.00
4
Gross profit
$4,860,000.00
$4,560,000.00
5
Selling expenses
$2,160,000.00
$2,000,000.00
6
Administrative expenses
1,627,500.00
1,500,000.00
7
Total operating expenses
$3,787,500.00
$3,500,000.00
8
Income from operations
$1,072,500.00
$1,060,000.00
9
Other income
99,500.00
20,000.00
10
$1,172,000.00
$1,080,000.00
11
Other expense (interest)
131,000.00
120,000.00
12
Income before income tax
$1,041,000.00
$960,000.00
13
Income tax expense
410,000.00
400,000.00
14
Net income
$631,000.00
$560,000.00
Marshall Inc.
Comparative Balance Sheet
December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Assets
3
Current assets:
4
Cash
$1,050,000.00
$950,000.00
5
Marketable securities
301,000.00
420,000.00
6
Accounts receivable (net)
586,000.00
500,000.00
7
Inventories
410,000.00
380,000.00
8
Prepaid expenses
107,000.00
20,000.00
9
Total current assets
$2,454,000.00
$2,270,000.00
10
Long-term investments
800,000.00
800,000.00
11
Property, plant, and equipment (net)
5,750,000.00
5,184,000.00
12
Total assets
$9,004,000.00
$8,254,000.00
13
Liabilities
14
Current liabilities
$821,000.00
$792,000.00
15
Long-term liabilities:
16
Mortgage note payable, 6%,
$200,000.00
$0.00
17
Bonds payable, 4%,
3,000,000.00
3,000,000.00
18
Total long-term liabilities
$3,200,000.00
$3,000,000.00
19
Total liabilities
$4,021,000.00
$3,792,000.00
20
Stockholders’ Equity
21
Preferred 4% stock, $5 par
$250,000.00
$250,000.00
22
Common stock, $5 par
500,000.00
500,000.00
23
Retained earnings
4,233,000.00
3,712,000.00
24
Total stockholders’ equity
$4,983,000.00
$4,462,000.00
25
Total liabilities and stockholders’ equity
$9,004,000.00
$8,254,000.00
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts): Assume a 365-day year.
working capital
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
Explanation / Answer
Answer to Part 1.:
Working Capital = Current Assets – Current Liabilities
Working Capital = $2,454,000 - $821,000
Working Capital = $1,633,000
Answer to Part 2.:
Current Ratio = Current Assets / Current Liabilities
Current Ratio = 2,454,000 / 821,000
Current Ratio = 3.0: 1
Answer to Part 3.:
Quick Ratio = (Current Assets – Inventories – Prepaid Expenses) / Current Liabilities
Quick Ratio = (2,454,000 – 410,000 – 107,000) / 821,000
Quick Ratio = 1,937,000 / 821,000
Quick Ratio = 2.4: 1
Answer to Part 4.:
Accounts Receivable Turnover = Net Sales / Average Accounts Receivable
Average Accounts Receivable = (586,000 + 500,000) / 2
Average Accounts Receivable = $543,000
Accounts Receivable Turnover = 10,860,000 / 543,000
Accounts Receivable Turnover = 20.0 times
Answer to Part 4.:
Number of days’ Sales in Receivable = 365 / Accounts Receivable Turnover
Number of days’ Sales in Receivable = 365 / 20
Number of days’ Sales in Receivable = 18.3 or 18 days