Problem 24-03 aSplish Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Splish and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,980 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $6,060 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Splish’s cash flow problems are due primarily to the company’s desire to finance a $298,500 plant expansion over the next 2 fiscal years through internally generated funds.The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.Splish CorporationBalance SheetMarch 31Assets 2021 2020Cash $18,050 $12,590Notes receivable 147,320 130,790Accounts receivable (net) 132,920 125,940Inventories (at cost) 105,990 49,780Plant & equipment (net of depreciation) 1,445,010 1,412,350 Total assets $1,849,290 $1,731,450 Liabilities and Owners’ Equity Accounts payable $78,710 $90,810Notes payable 76,020 61,260Accrued liabilities 4,360 1,880Common stock (130,000 shares, $10 par) 1,301,250 1,293,620Retained earningsa 388,950 283,880 Total liabilities and stockholders’ equity $1,849,290 $1,731,450 aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.Splish CorporationIncome StatementFor the Fiscal Years Ended March 31 2021 2020Sales revenue $3,000,740 $2,718,060Cost of goods solda 1,528,300 1,433,820Gross margin 1,472,440 1,284,240Operating expenses 868,470 779,910Income before income taxes 603,970 504,330Income taxes (40%) 241,588 201,732Net income $362,382 $302,598 aDepreciation charges on the plant and equipment of $99,500 and $102,710 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.(a)Compute the following items for Splish Corporation. (Round answers to 2 decimal places, e.g. 2.25 or 2.25%.)1. Current ratio for fiscal years 2020 and 2021.2. Acid-test (quick) ratio for fiscal years 2020 and 2021.3. Inventory turnover for fiscal year 2021.4. Return on assets for fiscal years 2020 and 2021. (Assume total assets were $1,690,000 at 3/31/19.)5. Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2020 to 2021. 2020 20211. Current ratio enter the ratio rounded to 2 decimal places :1 enter the ratio rounded to 2 decimal places :12. Acid-test (quick) ratio enter the ratio rounded to 2 decimal places :1 enter the ratio rounded to 2 decimal places :13. Inventory turnover enter the inventory turnover rounded to 2 decimal places times4. Return on assets enter the return on assets in percentages rounded to 2 decimal places % enter the return on assets in percentages rounded to 2 decimal places %5. Percent Changes Percent Increase Sales revenue enter percentages rounded to 2 decimal places % Cost of goods sold enter percentages rounded to 2 decimal places % Gross margin enter percentages rounded to 2 decimal places % Net income after taxes enter percentages rounded to 2 decimal places %

i) Current Ratio The current ratio is a liquidity ratio that measures a company's ability to pay…

Answered: 1. Current ratio for fiscal years…

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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Problem 24-03 a

Splish Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Splish and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,980 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $6,060 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Splish’s cash flow problems are due primarily to the company’s desire to finance a $298,500 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.

Splish Corporation Balance Sheet March 31
Assets	2021	2020
Cash	$18,050	$12,590
Notes receivable	147,320	130,790
Accounts receivable (net)	132,920	125,940
Inventories (at cost)	105,990	49,780
Plant & equipment (net of depreciation)	1,445,010	1,412,350
Total assets	$1,849,290	$1,731,450

Liabilities and Owners’ Equity
Accounts payable	$78,710	$90,810
Notes payable	76,020	61,260
Accrued liabilities	4,360	1,880
Common stock (130,000 shares, $10 par)	1,301,250	1,293,620
Retained earnings^a	388,950	283,880
Total liabilities and stockholders’ equity	$1,849,290	$1,731,450

^aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.

Splish Corporation Income Statement For the Fiscal Years Ended March 31
	2021	2020
Sales revenue	$3,000,740	$2,718,060
Cost of goods sold^a	1,528,300	1,433,820
Gross margin	1,472,440	1,284,240
Operating expenses	868,470	779,910
Income before income taxes	603,970	504,330
Income taxes (40%)	241,588	201,732
Net income	$362,382	$302,598

^aDepreciation charges on the plant and equipment of $99,500 and $102,710 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.

(a)

Compute the following items for Splish Corporation. (Round answers to 2 decimal places, e.g. 2.25 or 2.25%.)

1.		Current ratio for fiscal years 2020 and 2021.
2.		Acid-test (quick) ratio for fiscal years 2020 and 2021.
3.		Inventory turnover for fiscal year 2021.
4.		Return on assets for fiscal years 2020 and 2021. (Assume total assets were $1,690,000 at 3/31/19.)
5.		Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2020 to 2021.

		2020		2021
1.	Current ratio	enter the ratio rounded to 2 decimal places	:1		enter the ratio rounded to 2 decimal places	:1
2.	Acid-test (quick) ratio	enter the ratio rounded to 2 decimal places	:1		enter the ratio rounded to 2 decimal places	:1
3.	Inventory turnover				enter the inventory turnover rounded to 2 decimal places	times
4.	Return on assets	enter the return on assets in percentages rounded to 2 decimal places	%		enter the return on assets in percentages rounded to 2 decimal places	%

5.	Percent Changes	Percent Increase
	Sales revenue	enter percentages rounded to 2 decimal places	%
	Cost of goods sold	enter percentages rounded to 2 decimal places	%
	Gross margin	enter percentages rounded to 2 decimal places	%
	Net income after taxes	enter percentages rounded to 2 decimal places	%

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1. Current ratio for fiscal years 2020 and 2021. 2. Acid-test (quick) ratio for fiscal years 2020 and 2021. 3. Inventory turnover for fiscal year 2021.

Problem 24-03 a