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Integrating case 5-23 balance sheet
Course:- Accounting Basics
Reference No.:- EM13149095

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integrating Case 5-23
Balance Sheet

Assets
Cash \$ 15,000
Accounts receivable (net) (e)
Inventory (d)
Prepaid expenses and other current assets (i)
Current assets (h)
Property, plant, and equipment (net) (j)
\$ (b)
Liabilities and Shareholders' Equity
Accounts payable \$ (g)
Short-term notes 5,000
Current liabilities (f)
Bonds payable (l)
Shareholders' equity (k)
\$ (b)
Income Statement
Sales (a)
Cost of goods sold (c)
Gross profit (c)
Operating expenses (o)
Interest expense (m)
Tax expense (n)
Net income mce_markernbsp;
Case 5-23 (concluded)

Calculations (\$ in 000s):
a. Profit margin on sales = Net income ÷ Sales = 5%
For example:
Net income = 17000
17000/X = .05
Cross multiply
17000
_____ =.05
X
17000 = .05X
Divide both sides by .05
X = 17000/.05
X = 340,000

b. Return on assets = Net income ÷ Total assets = 7.5%
For example:
Net income = 17000
17000/X = .075
Cross multiply
17000 = .075X
Divide both sides by .075
X = 17000/.075
X = 226,666

c. Gross profit margin = Gross profit ÷ Sales = 40%
Cost of goods sold = Sales - Gross profit =
d. Inventory turnover ratio = Cost of goods sold ÷ Inventory = 6

e. Receivables turnover ratio = Sales ÷ Accounts receivable = 25
f. Acid-test ratio = Cash + AR + ST Investments ÷ Current liabilities = .9
g. Accounts payable = Current liabilities - Short-term notes = \$
h. Current ratio = Current assets ÷ Current liabilities = 2

i. Prepaid expenses and other current assets =
Current assets - (Cash + AR + Inventory) = \$
j. Property, plant, and equipment = Total assets - Current assets =
k. Return on shareholders' equity = Net income ÷ Shareholders' equity =10%

l. Debt to equity ratio = Total liabilities ÷ Shareholders' equity =
Bonds payable = Total liabilities - Current liabilities =
m. Interest expense = 8% x (Short-term notes + Bonds )
Interest expense =
n Times interest earned ratio = (Net income + Interest +Taxes) ÷ Interest = 12
Times interest earned ratio =
Times interest earned ratio =
Tax expense = mce_markernbsp;
o. Operating expenses = (Sales - Cost of goods sold - Interest expense - Tax expense) - Net income =

Case 5-23

Net income     16000

Short term note           5000

Bonds interest rate    0.08

Cash balance  15000

Profit margin on sales             0.05

Return on assets         0.075

Gross profit margin   0.4

Inventory turnover ratio       6

Receivables turnover ratio   25

Acid test ratio               0.9

Current ratio  2

Return on shareholders equity          0.1

Debt to equity ratio   0.33

Times interest earned             12

Integrating Case 5-23

Balance Sheet

Assets

Cash        \$  15,000
Accounts receivable (net)                   (e)
Inventory              (d)
Prepaid expenses and other current assets               (i)

Current assets              (h)
Property, plant, and equipment (net)             (j)
\$        (b)
Liabilities and Shareholders’ Equity
Accounts payable \$        (g)
Short-term notes        5,000

Current liabilities                  (f)
Bonds payable                (l)
Shareholders’ equity                 (k)
\$        (b)

Income Statement

Sales                  (a)
Cost of goods sold           (c)
Gross profit                  (c)
Operating expenses                    (o)
Interest expense               (m)
Tax expense           (n)
Net income \$

##### Case 5-23 (concluded)

Calculations (\$ in 000s):

a.  Profit margin on sales = Net income ÷ Sales = 5%

For example:

Net income = 17000

17000/X = .05

Cross multiply

17000

_____    =.05

X

17000 = .05X

Divide both sides by .05

X = 17000/.05

X = 340,000

b.  Return on assets = Net income ÷ Total assets = 7.5%

For example:

Net income = 17000

17000/X = .075

Cross multiply

17000 = .075X

Divide both sides by .075

X = 17000/.075

X = 226,666

c.  Gross profit margin = Gross profit ÷ Sales = 40%
Cost of goods sold = Sales – Gross profit =

d.  Inventory turnover ratio = Cost of goods sold ÷ Inventory = 6

e.  Receivables turnover ratio = Sales ÷ Accounts receivable = 25

f.   Acid-test ratio = Cash + AR + ST Investments ÷ Current liabilities = .9

g.  Accounts payable = Current liabilities – Short-term notes = \$

h.  Current ratio = Current assets ÷ Current liabilities = 2

i.   Prepaid expenses and other current assets =
Current assets – (Cash + AR + Inventory) = \$

j.   Property, plant, and equipment = Total assets – Current assets =

k.  Return on shareholders’ equity = Net income ÷ Shareholders’ equity =10%

l.   Debt to equity ratio = Total liabilities ÷ Shareholders’ equity =
Bonds payable = Total liabilities – Current liabilities =

m. Interest expense = 8% x (Short-term notes + Bonds )
Interest expense =

n   Times interest earned ratio = (Net income + Interest +Taxes) ÷ Interest = 12
Times interest earned ratio =
Times interest earned ratio =
Tax expense = \$

o.           Operating expenses = (Sales – Cost of goods sold – Interest expense – Tax expense) – Net income =

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