PRIOR COMPANY BALANCE SHEET Dec. 31, 2017 Dec. 31, 2016 52,000 198,000 80,000 440,000 3,000 $ 60,000 80,000 40,000 360,000 7,000 Cash $ Accounts receivable (net) Short-term investments Inventory Prepaid expenses $ 773,000 857,000 $ 547,000 853,000 Total current assets Property, plant, and equipment (net) Total assets $1,630,000 $1,400,000 240,000 400,000 990,000 Current liabilities Bonds payable Common stockholders’ equity 160,000 400,000 840,000 Total liabilities and stockholders' equity $1,630,000 $1,400,000 INCOME STATEMENT FOR THE YEAR ENDED 2017 $1,640,000 (800,000) Sales revenue Cost of goods sold Gross profit Selling and administrative expenses Interest expense 840,000 (440,000) (40,000) Net income $ 360,000
PRIOR COMPANY BALANCE SHEET Dec. 31, 2017 Dec. 31, 2016 52,000 198,000 80,000 440,000 3,000 $ 60,000 80,000 40,000 360,000 7,000 Cash $ Accounts receivable (net) Short-term investments Inventory Prepaid expenses $ 773,000 857,000 $ 547,000 853,000 Total current assets Property, plant, and equipment (net) Total assets $1,630,000 $1,400,000 240,000 400,000 990,000 Current liabilities Bonds payable Common stockholders’ equity 160,000 400,000 840,000 Total liabilities and stockholders' equity $1,630,000 $1,400,000 INCOME STATEMENT FOR THE YEAR ENDED 2017 $1,640,000 (800,000) Sales revenue Cost of goods sold Gross profit Selling and administrative expenses Interest expense 840,000 (440,000) (40,000) Net income $ 360,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Practice Pack
(Ratio Computations and Analysis) Prior Company’s condensed financial statements provide the following information.
Check the below image for information.
Instructions
(a) Determine the following for 2017.
(1)
(2) Acid-test ratio at December 31.
(3)
(4) Inventory turnover.
(5) Return on assets.
(6) Profit margin on sales.
(b) Prepare a brief evaluation of the financial condition of Prior Company and of the adequacy of its profits.
Transcribed Image Text:PRIOR COMPANY
BALANCE SHEET
Dec. 31, 2017
Dec. 31, 2016
52,000
198,000
80,000
440,000
3,000
$
60,000
80,000
40,000
360,000
7,000
Cash
$
Accounts receivable (net)
Short-term investments
Inventory
Prepaid expenses
$ 773,000
857,000
$ 547,000
853,000
Total current assets
Property, plant, and equipment (net)
Total assets
$1,630,000
$1,400,000
240,000
400,000
990,000
Current liabilities
Bonds payable
Common stockholders’ equity
160,000
400,000
840,000
Total liabilities and stockholders' equity
$1,630,000
$1,400,000
INCOME STATEMENT
FOR THE YEAR ENDED 2017
$1,640,000
(800,000)
Sales revenue
Cost of goods sold
Gross profit
Selling and administrative expenses
Interest expense
840,000
(440,000)
(40,000)
Net income
$ 360,000
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