1.9. (Ratio analysis) The financial statements and industry norms are shown below for the Congo Mining Company: ...... d. How is the firm financing its assets? e. Are its managers generating a good return on equity? INDUSTRY NORM Current ratio 5.10 Acid-test (quick) ratio 3.20 Inventory turnover Average collection period Debt ratio Times interest earned 2.40 88.00 0.35 7.15 Total asset turnover 0.78 Fixed-asset turnover 1.10 Operating profit margin 23% Return on common equity 11% The Congo Mining Company Balance Sheet at 12/31/2017 and 12/31/2018 Assets 2017 2018 Cash $ 220 $ 170 430 415 Accounts receivable Inventory 655 570 $1,220 $1,240 Current assets $2,300 $2.700 Plant and equipment Less accumulated depreciation (1.300) $1.400 (1.000) $1.300 Net plant and equipment $2.520 $2.640 Total assets Liabilities and Owners' Equity $ 220 $ 170 Accounts payable Notes payable-current (9%) Current liabilities 170 $ 340 $ 220 700 700 Bands (8.65% interest) Total debt $1.040 $ 920 $ 350 $ 350 Owners equity Common stock 600 600 Paid-in capital 650 $1.600 650 Retained earnings $1.600 Total owners' equity $2.640 $2.520 Total liabilities and owners' eguity

1.9. (Ratio analysis) The financial statements and industry norms are shown below for the Congo Mining Company: ...... d. How is the firm financing its assets? e. Are its managers generating a good return on equity? INDUSTRY NORM Current ratio 5.10 Acid-test (quick) ratio 3.20 Inventory turnover Average collection period Debt ratio Times interest earned 2.40 88.00 0.35 7.15 Total asset turnover 0.78 Fixed-asset turnover 1.10 Operating profit margin 23% Return on common equity 11% The Congo Mining Company Balance Sheet at 12/31/2017 and 12/31/2018 Assets 2017 2018 Cash $ 220 $ 170 430 415 Accounts receivable Inventory 655 570 $1,220 $1,240 Current assets $2,300 $2.700 Plant and equipment Less accumulated depreciation (1.300) $1.400 (1.000) $1.300 Net plant and equipment $2.520 $2.640 Total assets Liabilities and Owners' Equity $ 220 $ 170 Accounts payable Notes payable-current (9%) Current liabilities 170 $ 340 $ 220 700 700 Bands (8.65% interest) Total debt $1.040 $ 920 $ 350 $ 350 Owners equity Common stock 600 600 Paid-in capital 650 $1.600 650 Retained earnings $1.600 Total owners' equity $2.640 $2.520 Total liabilities and owners' eguity

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concord Company manufactures tablecloths. Sales have grown rapidly over the past 2 years. As a result, the president has installed a budgetary control system for 2020. The following data were used in developing the master manufacturing overhead budget for the Ironing Department, which is based on an activity index of direct labor hours. Variable costs Rate per DirectLabor Hour Annual Fixed Costs Indirect labor $0.40 Supervision $43,680 Indirect materials 0.51 Depreciation 17,160 Factory utilities 0.34 Insurance 12,480 Factory repairs 0.24 Rent 23,040 The master overhead budget was prepared on the expectation that 484,200 direct labor hours will be worked during the year. In June, 38,600 direct labor hours were worked. At that level of activity, actual costs were as shown below.Variable—per direct labor hour: indirect labor $0.43, indirect materials $0.50, factory utilities $0.38, and factory repairs $0.29.Fixed: same as budgeted.
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