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Chapt 3 Problem 3 and 4 Answers

1) The document provides financial information for Isberg Industries to complete its balance sheet and income statement. 2) Using the provided ratios and financial metrics, key figures are calculated including total assets of $300,000, sales of $450,000, cost of goods sold of $337,500, accounts receivable of $45,000, inventory of $67,500, accounts payable of $90,000, common stock of $52,500, cash of $27,000, and fixed assets of $160,500. 3) The completed balance sheet and income statement figures are filled into the provided table.

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205 views

Chapt 3 Problem 3 and 4 Answers

1) The document provides financial information for Isberg Industries to complete its balance sheet and income statement. 2) Using the provided ratios and financial metrics, key figures are calculated including total assets of $300,000, sales of $450,000, cost of goods sold of $337,500, accounts receivable of $45,000, inventory of $67,500, accounts payable of $90,000, common stock of $52,500, cash of $27,000, and fixed assets of $160,500. 3) The completed balance sheet and income statement figures are filled into the provided table.

Uploaded by

muradkasassbek
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Problem 3-3

Balance sheet analysis


Complete the balance sheet and sales information in the
table that follows for Isberg Industries using the following
financial data:
Debt ratio: 50%
Quick ratio: 0.8 X
Total asset turnover: 1.5 X
Days sales outstanding: 36 days
(A/R collection period is 36 days)
(A/R turnover ratio ?)
Gross profit margin on sales; (Sales COGS)/Sales = 25%
Inventory turnover ratio: 5 X
Balance sheet
Cash
8)
Accounts payable
Account receivable 5) Long-term debt
Inventories _ 4)
Common stock
___7)____
Fixed assets ___9)___ Retained earnings
Total assets $300,000
Sales

_ 2)__

6)
$60,000
$97,500

Total Liabilities and equity _1)_


Cost of goods sold

3)

1) TA = TL & E = $300,000
2) TA turnover ratio =1.5 X
Sales/TA = 1.5 X.
Sales = TA times 1.5
Sales =$3000,000 X 1.5 = $450,000
3) Gross profit margin = 25%
COGS = 75% of sales
COGS = ($450,000)(0.75) =$337,500
4) Inventory turnover = COGS/INV = 5
inventory = COGS/5 =$67,500
5) DSO = 36 days
Accounts receivable in $ is daily sales times
36 days
($450,000/360) X 36 days = $45,000
6) Debt ratio = 0.5
Debt = (TA)(0.5) Total debt = $15,000
A/P + Long-term debt = $15,000
A/P = $15,000 - $60,000 = $90,000
7) common stock = Total Liabilities and C/S - Total
debt - Retained earning
$300,000 - $150,000 - $97,000 = $52,500
8) Quick ratio = (Cash + A/R)/A/P
(Cash + $45,000)/$90,000 = 0.8
Cash + $45,000 = ($90,000)(0.8)
Cash + $45,000 = $72,000
Cash = $27,000
9) Fixed assets = Total assets all other assets
= $300,000 ($27,000 + $45,000 + $67,500)
= $160,500

3-4)

Finnerty Furniture

Current ratio = $303/$111 = 2.73 X


Debt ratio = $135/$450 = 30%
EBIT/Interest = $49.5/$4.5 = 11.0 X
DSO = $66/daily sales
= $66/2.21 = 28.89 days
FA turnover ratio = Sales/FA
= $795/$147 = 5.41 X
TA turnover ratio = $795/$450= 1.77 X
Net profit margin = (Net Income)/Sales
= $27/$795 = 3.4%

Ind Ave.
2.0 X
30%
7.0 X
24 days
6.0 X
3.0 X
3.0%

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