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EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales ...... Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses. Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.

EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales ...... Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses. Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.

FINANCIAL ACCOUNTING
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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See attached 1-3 and 1-5 information 

Refer to the information in Exercises 1–3 and 1–5 about Mixon Company. Compare the long-term risk and capital structure positions of the company at the end of 2006 and 2005 by computing the following ratios: (a) total debt ratio and (b) times interest earned. Comment on these ratio results.

EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $ 31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.
Transcribed Image Text:EXERCISE 1-5 Evaluating Short-Term Liquidity Refer to the information in Exercise 1-3 about Mixon Company. The company's income state- ments for the years ended December 31, 2006 and 2005 show the following: 2006 Sales Cost of goods sold Other operating expenses Interest expense Income taxes Total costs and expenses Net income Earnings per share $410,225 208,550 11,100 8,525 $672,500 (638,400) $ 34,100 $ 2.10 $344,500 133,980 12,300 7,845 2005 $530,000 (498,625) $ 31,375 $ 1.93 Required: For the years ended December 31, 2006 and 2005, assume all sales are on credit and then compute the following: (a) collection period, (b) accounts receivable turnover, (c) inventory turnover, and (d) days' sales in inventory. Comment on the changes in the ratios from 2005 to 2006.
Mixon Company's year-end balance sheets show the following: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Accounts payable .. Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 2006 $ 30,800 88,500 111,500 9,700 277,500 $518,000 $128,900 97,500 162,500 129,100 $518,000 2005 2004 $ 35,625 $36,800 62,500 49,200 82,500 53,000 9,375 4,000 255,000 229,500 $445,000 $372,500 $ 75,250 $ 49,250 102,500 82,500 162,500 162,500 104,750 78,250 $445,000 $372,500 Required: Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results. EXERCISE 1-3 Evaluating Short-Term Liquidity
Transcribed Image Text:Mixon Company's year-end balance sheets show the following: Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Accounts payable .. Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings Total liabilities and equity 2006 $ 30,800 88,500 111,500 9,700 277,500 $518,000 $128,900 97,500 162,500 129,100 $518,000 2005 2004 $ 35,625 $36,800 62,500 49,200 82,500 53,000 9,375 4,000 255,000 229,500 $445,000 $372,500 $ 75,250 $ 49,250 102,500 82,500 162,500 162,500 104,750 78,250 $445,000 $372,500 Required: Compare the year-end short-term liquidity position of this company at the end of 2006, 2005, and 2004 by computing the: (a) current ratio and (b) acid-test ratio. Comment on the ratio results. EXERCISE 1-3 Evaluating Short-Term Liquidity
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