A partial balance sheet and income statement

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Chapter 5: Problem 5-7

Required

  1. Complete the increase (decrease) in dollars and percent.
  2. Comment on trends

Rapid Retail Comparative Statement of Income

December 31 Increase (Decrease)

(In thousands of dollars) 2011 2010 Dollars Percent

Net sales $30,000 $28,000

 

Cost of goods sold 20,000 19,500

 

Gross profit 10,000 8,500

 

Selling, general and

administrative expense 3,000 2,900

 

Operating income 7,000 5,600

 

Interest expense 100 80

 

Income before taxes 6,900 5,520

 

Income tax expense 2,000 1,600

 

Net income 4,900 3,920

 

 

Chapter 6: Problem 6-11

A partial balance sheet and income statement for King Corporation follow:

KING CORPORATION

Partial Balance Sheet

December 31, 2011

Assets

Current assets:

Cash $ 33,493

Marketable securities 215,147

Trade receivables, less allowance of 6,000 255,000

Inventories LIFO 523,000

Prepaid expenses 26,180

Total current assets $ 1,052,820

 

Liabilities

Current liabilities:

Trade accounts payable $103,689

Notes payables (primarily to banks) and commercial paper 210,381

Accrued expenses and other liabilities 120,602

Income taxes payable 3,120

Current maturities of long term debt 22,050

 

Total current liabilities 459,842

 

 

KING CORPORATION

Partial Balance Sheet

December 31, 2011

 

Net sales $3,050,600

Miscellaneous income 45,060

$3,095,660

Costs and expenses:

Cost of Sales $2,184,100

Selling, general, and administrative expenses 350,265

Interest expense 45,600

Income taxes 300,000

$2,880,965

Net income $ 214,695

 

Note: The trade receivables at December 31, 210, were $280,000, net of an allowance of $8,000 for a gross receivables figure of $288,000. The inventory at December 31, 2010, was $565,000.

 

Required: Compute the following;

 

a. Working capital

b. Current ratio

c. Acid-test ratio

d. Cast ratio

e. Day’s sales in receivables

f. Accounts payables

g. Day’s sales in inventory

h. Inventory turnover in days

i. Operating cycle

 

Problem 6-15

The following financial data were taken from the annual financial statements of Smith Corporation.

2009 2010 2011

Current assets $ 450,000 $ 400,000 $ 500,000

Current liabilities 390,000 300,000 340,000

Sales 1,450,000 1,500,000 1,400,000

Cost of goods sold 1,180,000 1,020,000 1,120,000

Inventory 280,000 200,000 250,000

Accounts receivable 120,000 110,000 105,000

 

Required:

  1. Based on these data, calculate the following for 2010 and 2011:

1. Working capital

2. Current ratio

3. Acid-test ratio

4. Accounts receivables turnover

5. Merchandise inventory turnover

6. Inventory turnover in days

 

  1. Evaluate the results of your computations in regard to the short-term liquidity of the firm.