Question : Ex. 196 The financial statements of Gaines Company appear below: GAINES COMPANY Comparative : 1312012

 

Ex. 196

The financial statements of Gaines Company appear below:

 

GAINES COMPANY

Comparative Balance Sheet

December 31,

———————————————————————————————————————————

Assets    2013      2012

Cash…………………………………………..$  25,000$  40,000

Short-term investments………………………………15,00060,000

Accounts receivable (net)…………………………….50,00030,000

Inventory……………………………………….50,00070,000

Property, plant and equipment (net)……………………..  260,000  300,000

Total assets ……………………………………..$400,000$500,000

 

Liabilities and stockholders’ equity

Accounts payable………………………………….$  20,000$  30,000

Short-term notes payable…………………………….30,00090,000

Bonds payable……………………………………90,000160,000

Common stock……………………………………150,000150,000

Retained earnings………………………………….  110,000    70,000

Total liabilities and stockholders’ equity……………………$400,000$500,000

 

 

Ex. 196  (cont.)

GAINES COMPANY

Income Statement

For the Year Ended December 31, 2013

 

Net sales………………………………………..$400,000

Cost of goods sold………………………………….  240,000

Gross profit………………………………………160,000

Expenses

Operating expenses…………………………………$42,000

Interest expense…………………………………..18,000

Total expenses……………………………………  60,000

Income before income taxes…………………………..100,000

Income tax expense…………………………………    30,000

Net income………………………………………$  70,000

 

 

Additional information:

a.Cash dividends of $23,000 were declared and paid in 2013.

b.Weighted-average number of shares of common stock outstanding during 2013 was 30,000 shares.

c.Market value of common stock on December 31, 2013, was $21 per share.

 

Instructions

Using the financial statements and additional information, compute the following ratios for Gaines Company for 2013. Show all computations.

Computations

1.              Current ratio _________.

2.              Return on common stockholders’ equity _________.

3.              Price-earnings ratio _________.

4.              Acid-test ratio _________.

5.              Receivables turnover _________.

6.              Times interest earned _________.

7.              Profit margin _________.

8.              Days in inventory _________.

9.              Payout ratio _________.

10.              Return on assets _________.

 

Ex. 197

The following ratios have been computed for Mason Company for 2013.

Profit margin12.5%

Times interest earned7 times

Receivables turnover4 times

Acid-test ratio2 : 1

Current ratio3 : 1

Debt to total assets ratio20%

 

Mason Company’s 2013 financial statements with missing information follow:

 

MASON COMPANY

Comparative Balance Sheet

December 31,

———————————————————————————————————————————

Assets     2013      2012

Cash………………………………………..$  30,000$  45,000

Short-term Investments……………………………10,00025,000

Accounts receivable (net)………………………….?(6)40,000

Inventory…………………………………….?(8)50,000

Property, plant, and equipment (net)…………………..  200,000 160,000

Total assets……………………………………$      ?  (9)$320,000

 

Liabilities and stockholders’ equity

Accounts payable……………………………….$      ?(7)$  30,000

Short-term notes payable………………………….40,00035,000

Bonds payable…………………………………?(10)20,000

Common stock…………………………………220,000200,000

Retained earnings……………………………….     60,000                    35,000

Total liabilities and stockholders’ equity…………………$      ?  (11)$320,000

 

MASON COMPANY

Income Statement

For the Year Ended December 31, 2013

———————————————————————————————————————————

Net sales……………………………………..$200,000

Cost of goods sold……………………………….  75,000

Gross profit……………………………………125,000

Expenses:

Depreciation expense…………………………….$     ?(5)

Interest expense………………………………..5,000

Selling expenses………………………………..8,000

Administrative expenses………………………….. 12,000

Total expenses………………………………… ?     (4)

Income before income taxes………………………..?(2)

Income tax expense……………………………… ?     (3)

Net income……………………………………$   ?     (1)

 

Ex. 197(Cont.)

 

Instructions

Use the above ratios and information from the Mason Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

 

 

 

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