Fundamental Interpretations Made from Financial Statement Data
Presented below are the comparative balance sheets of Big Apple, Inc., at December 31, 2017, and 2016. Sales for the year ended December 31, 2017, totaled $1,780,000.
BIG APPLE, INC.
Balance Sheets
December 31, 2017, and 2016
2017 2016
Assets
Cash $90,000 $98,000
Accounts receivable 268,000 212,000
Merchandise inventory 402,000 394,000
Total current assets $760,000 $704,000
Land 132,000 120,000
Plant and equipment 728,000 650,000
Less: Accumulated depreciation (372,000) (314,000)
Total assets $1,248,000 $1,160,000
Liabilities
Short-term debt $98,000 $86,000
Accounts payable 184,000 168,000
Other accrued liabilities 128,000 134,000
Total current liabilities $410,000 $388,000
Long-term debt 174,000 214,000
Total liabilities $584,000 $602,000
Stockholders’ Equity
Common stock, no par, 100,000 shares authorized, 35,000 and 28,000 shares issued, respectively $204,000 $156,000
Retained earnings:
Beginning balance 402,000 336,000
Net income for the year 148,000 134,000
Dividends for the year (90,000) (68,000)
Ending balance $460,000 $402,000
Total stockholders’ equity $664,000 $558,000
Total liabilities and stockholders’ equity $1,248,000 $1,160,000
Required:
A) Calculate ROI for 2017.
B) Calculate ROE for 2017.
C) Calculate working capital at December 31, 2017.
D) Calculate the current ratio at December 31, 2017.
E) Calculate the acid-test ratio at December 31, 2017.
Firm V has a current ratio of 1.9 and current assets of $136,800.
Required:
Calculate Firm V's current liabilities and working capital.
Firm W has accounts receivable of $4,100, cash of $3,500, property, plant, and equipment of $30,200, merchandise inventory of $2,200, accounts payable of $5,700, other accrued liabilities of $1,300, common stock of $10,000, and retained earnings of $23,000.
Required:
Calculate Firm W's working capital and current ratio.
Firm X has net income of $18,000, sales of $300,000, and average total assets of $125,000.
Required:
Calculate Firm X's margin, turnover, and return on investment (ROI).
Firm Y has a margin of 7%, turnover of 1.2, and sales of $2,100,000.
Required:
Calculate Firm Y's net income, average total assets, and return on investment (ROI).
Firm Z had net assets at the end of the year of $320,000. The only transactions affecting stockholders' equity during the year were net income of $51,000 and dividends of $11,000.
Required:
Calculate Firm Z's average stockholders' equity and return on equity (ROE).