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E7A. BUSINESS APPLICATION statement follow. Assets Current assets Investments Property, plant, and equipment Intangible assets Total assets A company's simplified balance sheet and income Balance Sheet December 31, 2014 $ 50,000 10,000 146,500 13,500 $220,000 Net sales Cost of goods sold Gross margin Operating expenses Net income Liabilities Current liabilities Long-term liabilities Total liabilities Owner's Equity Income Statement For the Year Ended December 31, 2014 Owner's capital Total liabilities and owner's equity $410,000 250,000 $160,000 135,000 $ 25,000 $ 20,000 30,000 $ 50,000 170,000 $220,000 Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) teat does not materially affect the overall learning experience. Cengage Learning reserves the right remove additional content at any time subsequent rights restrictions require it 197 Total assets and owner's equity at the beginning of 2014 were $180,000 and $140,000, respectively. The owner made no investments or withdrawals during the year. 1. Compute the following liquidity measures: (a) working capital and (b) current ratio. (Round to one decimal place.) 2. Compute the following profitability measures: (a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity. (Round to one decimal place.)

E7A. BUSINESS APPLICATION statement follow. Assets Current assets Investments Property, plant, and equipment Intangible assets Total assets A company's simplified balance sheet and income Balance Sheet December 31, 2014 $ 50,000 10,000 146,500 13,500 $220,000 Net sales Cost of goods sold Gross margin Operating expenses Net income Liabilities Current liabilities Long-term liabilities Total liabilities Owner's Equity Income Statement For the Year Ended December 31, 2014 Owner's capital Total liabilities and owner's equity $410,000 250,000 $160,000 135,000 $ 25,000 $ 20,000 30,000 $ 50,000 170,000 $220,000 Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) teat does not materially affect the overall learning experience. Cengage Learning reserves the right remove additional content at any time subsequent rights restrictions require it 197 Total assets and owner's equity at the beginning of 2014 were $180,000 and $140,000, respectively. The owner made no investments or withdrawals during the year. 1. Compute the following liquidity measures: (a) working capital and (b) current ratio. (Round to one decimal place.) 2. Compute the following profitability measures: (a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity. (Round to one decimal place.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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LO 3 RATIO Liquidity and Profitability Ratios E7A. BUSINESS APPLICATION A company's simplified balance sheet and income statement follow. ents Assets Current assets Investments Property, plant, and equipment Intangible assets Total assets Balance Sheet December 31, 2014 $ 50,000 10,000 146,500 13,500 $220,000 Net sales Cost of goods sold Gross margin Operating expenses Net income Liabilities Current liabilities Long-term liabilities Total liabilities Owner's Equity Income Statement For the Year Ended December 31, 2014 Owner's capital Total liabilities and owner's equity $410,000 250,000 $160,000 135,000 $ 25,000 $ 20,000 30,000 $ 50,000 170,000 $220,000 Learning. All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part. Due to electronic righto, come third party content may be suppressed from the cBook and/or oChapter(s) 21 any suppressed contem does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subacqueat rights restrictions require it 197 Total assets and owner's equity at the beginning of 2014 were $180,000 and $140,000, respectively. The owner made no investments or withdrawals during the year. 1. Compute the following liquidity measures: (a) working capital and (b) current ratio. (Round to one decimal place.) 2. Compute the following profitability measures: (a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity. (Round to one decimal place.)
Transcribed Image Text:LO 3 RATIO Liquidity and Profitability Ratios E7A. BUSINESS APPLICATION A company's simplified balance sheet and income statement follow. ents Assets Current assets Investments Property, plant, and equipment Intangible assets Total assets Balance Sheet December 31, 2014 $ 50,000 10,000 146,500 13,500 $220,000 Net sales Cost of goods sold Gross margin Operating expenses Net income Liabilities Current liabilities Long-term liabilities Total liabilities Owner's Equity Income Statement For the Year Ended December 31, 2014 Owner's capital Total liabilities and owner's equity $410,000 250,000 $160,000 135,000 $ 25,000 $ 20,000 30,000 $ 50,000 170,000 $220,000 Learning. All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part. Due to electronic righto, come third party content may be suppressed from the cBook and/or oChapter(s) 21 any suppressed contem does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subacqueat rights restrictions require it 197 Total assets and owner's equity at the beginning of 2014 were $180,000 and $140,000, respectively. The owner made no investments or withdrawals during the year. 1. Compute the following liquidity measures: (a) working capital and (b) current ratio. (Round to one decimal place.) 2. Compute the following profitability measures: (a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity. (Round to one decimal place.)
LO 2,3 RATIO ts: $625,800 Classified Balance Sheet P4. The information that follows is from Cullen's Hardware Company's June 30, 2014, post-closing trial balance. Account Name Cash Short-Term Investments Sales Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Accounts Receivable Office Supplies E. Cullen, Capital Notes Receivable Land Delivery Equipment Accumulated Depreciation-Delivery Equipment Trademark Accounts Payable Salaries Payable Deposit for Future Advertising Interest Payable Long-Term Notes Payable Building, Not in Use Debit 42,800 34,300 1,280 145,000 2,100 4,800 287,000 440 10,000 31,400 43,200 4,000 3,680 44,200 654,200 Credit 412,660 28,400 124,600 7,700 840 80,000 654,200 REQUIRED 1. Prepare a classified balance sheet for Cullen's Hardware Company. 2. BUSINESS APPLICATION Compute Cullen's Hardware's current ratio and debt to equity ratio. (Round to one decimal place.) 3. BUSINESS APPLICATION As a user of the classified balance sheet, why would you want to know the current ratio or the debt to equity ratio?
Transcribed Image Text:LO 2,3 RATIO ts: $625,800 Classified Balance Sheet P4. The information that follows is from Cullen's Hardware Company's June 30, 2014, post-closing trial balance. Account Name Cash Short-Term Investments Sales Supplies Merchandise Inventory Prepaid Rent Prepaid Insurance Accounts Receivable Office Supplies E. Cullen, Capital Notes Receivable Land Delivery Equipment Accumulated Depreciation-Delivery Equipment Trademark Accounts Payable Salaries Payable Deposit for Future Advertising Interest Payable Long-Term Notes Payable Building, Not in Use Debit 42,800 34,300 1,280 145,000 2,100 4,800 287,000 440 10,000 31,400 43,200 4,000 3,680 44,200 654,200 Credit 412,660 28,400 124,600 7,700 840 80,000 654,200 REQUIRED 1. Prepare a classified balance sheet for Cullen's Hardware Company. 2. BUSINESS APPLICATION Compute Cullen's Hardware's current ratio and debt to equity ratio. (Round to one decimal place.) 3. BUSINESS APPLICATION As a user of the classified balance sheet, why would you want to know the current ratio or the debt to equity ratio?
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