Chapter 5: Problem 5-7
Required
- Complete the increase (decrease) in dollars and percent.
- 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:
- 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
- Evaluate the results of your computations in regard to the short-term liquidity of the firm.
