Problem 7-11 Balance Sheet Analysis Complete the balance sheet and sales informa

Question

Problem 7-11 Balance Sheet Analysis Complete the balance sheet and sales information in the table that follows for J. White Industries using the following financial data Total assets turnover: 2.6 Gross profit margin on sales: (Sales-Cost of goods sold)/Sales-21% Total liabilities-to-assets ratio: 45% Quick ratio: 1.00 Days sales outstanding (based on 365-day year): 30 days Inventory turnover ratio: 5.0 Round your answers to the nearest whole dollar Partial Income Statement Information Sales Cost of goods sold Balance Sheet Cash Accounts receivable$ Inventories Fixed assets Total assets Accounts payable Long-term debt Common stock Retained earnings Total liabilities and equity $ $50,000 $100,000 $400,000

Explanation / Answer

i) Total assets turnover = Sales / Total assets

or, 2.6 = Sales / $400,000

or, Sales = $1,040,000

ii) (Sales - Cost of Goods sold) / Sales = 0.21

or, ($1,040,000 - Cost of goods sold) / $1,040,000 = 0.21

or, Cost of goods sold = $821,600

iii) Total liabilities to Assets = 0.45

or, Total liabilities / Total assets = 0.45

or, Total liabilities = 0.45 x Total assets = 0.45 x $400,000 = $180,000

Also, Total liabilities = Accounts payable + Long term debt

or, Accounts payable = Total liabilities - Long term debt = $180,000 -$50,000 = $130,000

iv) Days Sales Outstanding = (Accounts receivable / Sales) x 365 days

or, 30 = (Accounts receivable / $1,040,000) x 365

or, Accounts receivable = $85,479

v) Quick ratio = (Cash + Accounts receivable) / Current liabilities

or, 1 = (Cash + $85,479) / $130,000

or, $130,000 = Cash + $85,479

or, Cash = $44,521

vi) Inventory turnover ratio = Sales / Inventory

or, 5 = $1,040,000 / Inventory

or, Inventory = $208,000

Partial income statement information Sales (i) $1,040,000 Cost of goods sold (ii) $821,600

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