The comparative financial statements of Marshall Inc. are as follows. The market
ID: 2578784 • Letter: T
Question
The comparative financial statements of Marshall Inc. are as follows. The market price of Marshall common stock was $82.60 on December 31, 20Y2.
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Retained earnings, January 1
$3,704,000.00
$3,264,000.00
3
Net income
600,000.00
550,000.00
4
Total
$4,304,000.00
$3,814,000.00
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
$4,194,000.00
$3,704,000.00
Marshall Inc.
Comparative Income Statement
For the Years Ended December 31, 20Y2 and 20Y1
1
20Y2
20Y1
2
Sales
$10,850,000.00
$10,000,000.00
3
Cost of goods sold
6,000,000.00
5,450,000.00
4
Gross profit
$4,850,000.00
$4,550,000.00
5
Selling expenses
$2,170,000.00
$2,000,000.00
6
Administrative expenses
1,627,500.00
1,500,000.00
7
Total operating expenses
$3,797,500.00
$3,500,000.00
8
Income from operations
$1,052,500.00
$1,050,000.00
9
Other income
99,500.00
20,000.00
10
$1,152,000.00
$1,070,000.00
11
Other expense (interest)
132,000.00
120,000.00
12
Income before income tax
$1,020,000.00
$950,000.00
13
Income tax expense
420,000.00
400,000.00
14
Net income
$600,000.00
$550,000.00
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)
585,000.00
500,000.00
7
Inventories
420,000.00
380,000.00
8
Prepaid expenses
108,000.00
20,000.00
9
Total current assets
$2,464,000.00
$2,270,000.00
10
Long-term investments
800,000.00
800,000.00
11
Property, plant, and equipment (net)
5,760,000.00
5,184,000.00
12
Total assets
$9,024,000.00
$8,254,000.00
13
Liabilities
14
Current liabilities
$880,000.00
$800,000.00
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
$4,080,000.00
$3,800,000.00
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
4,194,000.00
3,704,000.00
24
Total stockholders’ equity
$4,944,000.00
$4,454,000.00
25
Total liabilities and stockholders’ equity
$9,024,000.00
$8,254,000.00
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts):
Determine the following measures for 20Y2 (round to one decimal place, including percentages, except for per-share amounts):
Points:
12 / 18
Marshall Inc.
Comparative Retained Earnings Statement
For the Years Ended December 31, 20Y2 and 20Y1
Explanation / Answer
1) Working Capital for 20Y2 = Total Current Assets for 20Y2 - Current Liabilities for 20Y2
= $2,464,000 - $880,000 = $1,584,000
2) Current Ratio = Current Assets/Current Liabilities = $2,464,000/$880,000 = 2.8
3) Quick Ratio = Liquid Assets/Current Liabilities
Liquid Assets = Cash+Marketable Securities+Accounts receivable = 1,050,000+301,000+585,000 = $1,936,000
Quick Ratio = $1,936,000/$880,000 = 2.2
4) Accounts Receivable Turnover = Net credit sales/Average Accounts Receivables
= $10,850,000/($585,000+$500,000)/2 = $10,850,000/$542,500 = 20
(It is assumed that all sales are credit sales)