ABC Co. Balance Sheet 12/31/14 Additonal Financial information for the year ende
ID: 2649146 • Letter: A
Question
ABC Co. Balance Sheet 12/31/14
Additonal Financial information for the year ended 12/31/14
Sales- 1,607,500.00
Net Income- 253,000.00
Dividend paid- 87,500.00
Based on the above information calculate the followings:
1) Current Ratio
2) Quick Ratio
3) Inventory Turnover Ratio
4) Days Sales Outstanding
5) Prepare the statement of Retained Earnings at 12/31/14
ASSETS LIABILITIES & EQUITY Cash- 127,500.00 Accts payable- 125,000.00 Land/Bldg- 492,500.00 Notes payable(due within 12 mos) 80,000.00 Inventory- 191,500.00 Long Term Debt- 364,500.00 Acct. Receivable- 136,000.00 Retained Earnings- 378,000.00Explanation / Answer
Answer:
1) Current Ratio = Current Assets / Current Liabilities
Current Assets = Cash + Acct. Receivable+ Inventory = 127500 +136000 +191500 = $455000
Current Liabilities = Accts payable +Notes payable(due within 12 mos) =125000 + 80000 =205000
Current Ratio = 455000 / 205000 = 2.22
2) Quick Ratio = Quick Assets / Current Liabilities
Quick Assets = Cash + Acct. Receivable =$263500
Current Liabilities = Accts payable +Notes payable(due within 12 mos) =125000 + 80000 =205000
Quick Ratio= 263500 / 205000 = 1.29
3) Inventory Turnover Ratio = Cost of Goods sold / Inventory
= (Sales- Net Income) / Inventory
= (1,607,500-253,000) /191500
= 7.07
4) Days Sales Outstanding = Accounts Receivables *365 / Net credit sales
= 136000*365 / 1607500
= 30.88 Days
5) Statement of Retained Earnings at 12/31/14
Retained Earnings = 378000
Add: Net income $253000
Less: Dividend $87500
Retained Earnings at 12/31/14 = $543500