Please help Isa and Shane fill-in-the blanks to their balance sheet and income s
ID: 2755049 • Letter: P
Question
Please help Isa and Shane fill-in-the blanks to their balance sheet and income statement given the following ratios: Debt ratio 50% Quick ratio 2 (Current Assets -Inventory)/Current Liabilities Total Asset Turns 3 Net Sales/Assets DSO's 36.5 AR/AverageDaily Sales Gross Profit Margin 50% Inventory Turns 10 COGS/Inventory Balance Sheet ($M) Cash Accounts Payable Accounts Receivable Long-term Debt $ 1,000 Inventories Common Stock Fixed Assets Retained Earnings $ 500 Total Assets $ 4,000 Total Liabilities & Equity Income Statement ($M) Sales Cost of Goods Sold Quick Ratio 2 = (Current Assets -Inventory)/Current Liabilities 2 = (CA - Inv) / 1000 2000 = Current Assets - Inventory 2000 + inventory = current assets 2600 = current assets Cash = CA - Inv - AR Cash = 2600 - 1200 - 600 Cash = 800 Which makes fixed assets $1400 Please help Isa and Shane fill-in-the blanks to their balance sheet and income statement given the following ratios: Debt ratio 50% Quick ratio 2 (Current Assets -Inventory)/Current Liabilities Total Asset Turns 3 Net Sales/Assets DSO's 36.5 AR/AverageDaily Sales Gross Profit Margin 50% Inventory Turns 10 COGS/Inventory Balance Sheet ($M) Cash Accounts Payable Accounts Receivable Long-term Debt $ 1,000 Inventories Common Stock Fixed Assets Retained Earnings $ 500 Total Assets $ 4,000 Total Liabilities & Equity Income Statement ($M) Sales Cost of Goods Sold Quick Ratio 2 = (Current Assets -Inventory)/Current Liabilities 2 = (CA - Inv) / 1000 2000 = Current Assets - Inventory 2000 + inventory = current assets 2600 = current assets Cash = CA - Inv - AR Cash = 2600 - 1200 - 600 Cash = 800 Which makes fixed assets $1400Explanation / Answer
Let us solve ratios:
1)Debt ratio= Total Debt/ Total Assets=0.5
= Total Debt/$4,000=0.5
Total Debt=$2,000
Total Debt= Long Term Debt + Short term Debt( as per this question is Accounts payable is short term debt)
$2,000 =$1,000+ Accounts payable
Accounts payable =$2,000 -$1,000=$1,000
2)Quick ratio= (Current Assets -Inventory)/Current Liabilities=2
=(Current Assets -Inventory)/ Current Liabilities=2
=(Current Assets -Inventory)/=2 Current Liabilities( Current liabilities $1,000 given)
=Current Assets -Inventory= 2 x $1,000=$ 2,000
Current Assets=$ 2,000+ Inventory(current assets is $2,600 given)
$2,600=$ 2,000+ Inventory
Inventory=$2,600-$ 2,000-$600
Cash = CA - Inv – AR(AR is $1,200 given)
Cash=$2,600-$600-$1,200=$800
3)Total Asset Turns= Net Sales/Assets=3
= Net Sales/$4,000=3
Net Sales=$12,000
4)DSO's= AR/AverageDaily Sales=36.5
= AR/(Net Credit sales/365 days=36.5
=AR/ Net Credit sales x 365=36.5
= AR/ Net Credit sales=36.5/365
=AR/ Net Credit sales=0.10
AR=0.10 x Net Credit sales
$1,200=0.10 x Net Credit sales
Net Credit sales=$1,200 x 0.10=$12,000
5) Inventory Turns= COGS/Inventory=10
COGS=10 x Inventory=10 x $600=$,6000
6)Gross Profit Margin= COGS/Net sales=0.50
= COGS/ Net sales=0.50
COGS=0.50 x Net sales
$6,000=0.50 x Net sales
Net sales=$ 12,000
As per Formula 4 Net credit sales is $12,000 and Net sales also $12,000, hence all net sales is Credit sales
Liability Side:
Total Assets= Total Liabilities & Equity
As Total Assets is $ 4,000 hence Total Liabilities & Equity=$ 4,000
And Total Liabilities & Equity= Accounts Payable+ Long-term Debt +Common Stock+ Retained Earnings
$4,000 = Accounts Payable+$ 1,000+ Common Stock+$ 500
$4,000 = Accounts Payable+ Common Stock+$1,500
Accounts Payable+ Common Stock=$4,000-$1,500=$2,500
$1,000+ Common Stock=$2,500
Common Stock=$2,500-$1,000=$1,500
Asset Side:
Total Assets= Cash+ Accounts Receivable+ Inventories+ Fixed Assets
$4,000= Cash+ Accounts Receivable+ Inventories+ Fixed Assets
$4,000=$600+$1,200+$600
Fixed Assets=$4,000-$600+$1,200+$600=$1,400
Balance Sheet ($M)
Cash
$800
Accounts Payable
$1,000
Accounts Receivable
$1,200
Long-term Debt
$ 1,000
Inventories
$600
Common Stock
$1,500
Fixed Assets
$1,400
Retained Earnings
$ 500
Total Assets
$ 4,000
Total Liabilities & Equity
$ 4,000
Income Statement ($M)
Particulars
Amount
Sales
$12,000
Less:Cost of Goods Sold
$6,000
Gross Profit
$6,000
Balance Sheet ($M)
Cash
$800
Accounts Payable
$1,000
Accounts Receivable
$1,200
Long-term Debt
$ 1,000
Inventories
$600
Common Stock
$1,500
Fixed Assets
$1,400
Retained Earnings
$ 500
Total Assets
$ 4,000
Total Liabilities & Equity
$ 4,000