Ayayai 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 Ayayai 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 $34,970 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,970 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Ayayai’s cash flow problems are due primarily to the company’s desire to finance a $300,080 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. Ayayai Corporation Balance Sheet March 31 Assets 2021 2020 Cash $18,120 $12,410 Notes receivable 147,220 132,930 Accounts receivable (net) 130,790 124,530 Inventories (at cost) 104,940 49,570 Plant & equipment (net of depreciation) 1,446,500 1,416,510 Total assets $1,847,570 $1,735,950 Liabilities and Owners’ Equity Accounts payable $79,360 $90,220 Notes payable 75,910 61,040 Accrued liabilities 8,250 2,550 Common stock (130,000 shares, $10 par) 1,296,650 1,312,800 Retained earningsa 387,400 269,340 Total liabilities and stockholders’ equity $1,847,570 $1,735,950 aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021. Ayayai Corporation Income Statement For the Fiscal Years Ended March 31 2021 2020 Sales revenue $2,994,540 $2,716,340 Cost of goods solda 1,536,450 1,415,660 Gross margin 1,458,090 1,300,680 Operating expenses 856,120 784,640 Income before income taxes 601,970 516,040 Income taxes (40%) 240,788 206,416 Net income $361,182 $309,624 aDepreciation charges on the plant and equipment of $99,960 and $101,650 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold. (a) Compute the following items for Ayayai 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 $1,705,230 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 %

Ayayai 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 Ayayai 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 $34,970 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,970 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Ayayai’s cash flow problems are due primarily to the company’s desire to finance a $300,080 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. Ayayai Corporation Balance Sheet March 31 Assets 2021 2020 Cash $18,120 $12,410 Notes receivable 147,220 132,930 Accounts receivable (net) 130,790 124,530 Inventories (at cost) 104,940 49,570 Plant & equipment (net of depreciation) 1,446,500 1,416,510 Total assets $1,847,570 $1,735,950 Liabilities and Owners’ Equity Accounts payable $79,360 $90,220 Notes payable 75,910 61,040 Accrued liabilities 8,250 2,550 Common stock (130,000 shares, $10 par) 1,296,650 1,312,800 Retained earningsa 387,400 269,340 Total liabilities and stockholders’ equity $1,847,570 $1,735,950 aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021. Ayayai Corporation Income Statement For the Fiscal Years Ended March 31 2021 2020 Sales revenue $2,994,540 $2,716,340 Cost of goods solda 1,536,450 1,415,660 Gross margin 1,458,090 1,300,680 Operating expenses 856,120 784,640 Income before income taxes 601,970 516,040 Income taxes (40%) 240,788 206,416 Net income $361,182 $309,624 aDepreciation charges on the plant and equipment of $99,960 and $101,650 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold. (a) Compute the following items for Ayayai 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 $1,705,230 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 %

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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Ayayai Corporation Balance Sheet March 31
Assets	2021	2020
Cash	$18,120	$12,410
Notes receivable	147,220	132,930
Accounts receivable (net)	130,790	124,530
Inventories (at cost)	104,940	49,570
Plant & equipment (net of depreciation)	1,446,500	1,416,510
Total assets	$1,847,570	$1,735,950

Liabilities and Owners’ Equity
Accounts payable	$79,360	$90,220
Notes payable	75,910	61,040
Accrued liabilities	8,250	2,550
Common stock (130,000 shares, $10 par)	1,296,650	1,312,800
Retained earnings^a	387,400	269,340
Total liabilities and stockholders’ equity	$1,847,570	$1,735,950

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

Ayayai Corporation Income Statement For the Fiscal Years Ended March 31
	2021	2020
Sales revenue	$2,994,540	$2,716,340
Cost of goods sold^a	1,536,450	1,415,660
Gross margin	1,458,090	1,300,680
Operating expenses	856,120	784,640
Income before income taxes	601,970	516,040
Income taxes (40%)	240,788	206,416
Net income	$361,182	$309,624

^aDepreciation charges on the plant and equipment of $99,960 and $101,650 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.

(a)

Compute the following items for Ayayai 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 $1,705,230 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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