Tomato and Basil’s Italian Restaurant Income Statement: 2014 Sales $1,000,000 Op
ID: 2771367 • Letter: T
Question
Tomato and Basil’s Italian Restaurant
Income Statement:
2014
Sales $1,000,000
Operating Expenses 800,000
Depreciation 75,000
Interest Expense 10,000
Pretax Net Income 115,000
Income Taxes 34,500
Net Income $80,500
Balance Sheets:
2013 2014
Cash 20,000 30,000
Accounts Receivable 72,000 85,000
Inventory 16,000 18,000
Total Current Assets 108,000 133,000
Fixed Assets, net 240,000 190,000
Total Assets 348,000 323,000
Accounts Payable 54,000 70,000
Long-term Debt 115,000 95,000
Common Stock 30,000 30,000
Retained Earnings 149,000 128,000
Total Liabilities and Equity 348,000 323,000
Refer to the Tomato and Basil financial statements for #22-25:
Please show all work
22. What was the quick ratio for 2014?
23. Assuming that all 2014 sales are on credit, how many days of sales are in receivables? (Use 2014 values)
24. What is the cash coverage ratio for 2014?
25. What is the amount of the dividends paid for 2014?
Explanation / Answer
Solution.
22. What was the quick ratio for 2014?
Quick Ratio = Current Asset - inventory- prepaid expenses / Current laibilities
Quick ratio = (133,000 - 18,000) / 70,000
= 1.64
23. How many days of sales are in receivables?
Days of sales = Account receivables / Net Credit sales x 365
= 85,000 / 1,000,000 x 365
= 31.025
24. What is the cash coverage ratio for 2014?
Cash coverage ratio =Earnings Before Interest and Taxes + Non-Cash Expenses / Interest Expens
= 125,000 + 75,000 / 10,000
= 20
25. What is the amount of the dividends paid for 2014?
opening Retained Earnings = 149,000
Add:- Net Income = 80,500
Less:- Closing Retained Earnings = 128,000
Dividend Paid = 101,500 (Balanceing Figure)