Sage 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 Sage 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 $34,710 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,960 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Sage’s cash flow problems are due primarily to the company’s desire to finance a $297,780 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. Sage Corporation Balance Sheet March 31 Assets   2021   2020 Cash   $18,150   $12,590 Notes receivable   147,750   132,990 Accounts receivable (net)   132,330   125,910 Inventories (at cost)   104,180   50,480 Plant & equipment (net of depreciation)   1,452,190   1,415,700     Total assets   $1,854,600   $1,737,670           Liabilities and Owners’ Equity         Accounts payable   $79,360   $90,840 Notes payable   75,380   61,410 Accrued liabilities   12,350   15,660 Common stock (130,000 shares, $10 par)   1,311,880   1,287,060 Retained earningsa   375,630   282,700     Total liabilities and stockholders’ equity   $1,854,600   $1,737,670           aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.   Sage Corporation Income Statement For the Fiscal Years Ended March 31     2021   2020 Sales revenue   $2,978,310   $2,687,000 Cost of goods solda   1,521,880   1,422,100 Gross margin   1,456,430   1,264,900 Operating expenses   853,970   779,230 Income before income taxes   602,460   485,670 Income taxes (40%)   240,984   194,268 Net income   $361,476   $291,402           aDepreciation charges on the plant and equipment of $100,150 and $102,620 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold. (a) Compute the following items for Sage 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
100%

Sage 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 Sage 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 $34,710 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,960 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Sage’s cash flow problems are due primarily to the company’s desire to finance a $297,780 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.

Sage Corporation
Balance Sheet
March 31
Assets  
2021
 
2020
Cash
  $18,150   $12,590
Notes receivable
  147,750   132,990
Accounts receivable (net)
  132,330   125,910
Inventories (at cost)
  104,180   50,480
Plant & equipment (net of depreciation)
  1,452,190   1,415,700
    Total assets
  $1,854,600   $1,737,670
         
Liabilities and Owners’ Equity        
Accounts payable
  $79,360   $90,840
Notes payable
  75,380   61,410
Accrued liabilities
  12,350   15,660
Common stock (130,000 shares, $10 par)
  1,311,880   1,287,060
Retained earningsa
  375,630   282,700
    Total liabilities and stockholders’ equity
  $1,854,600   $1,737,670
         
aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.

 

Sage Corporation
Income Statement
For the Fiscal Years Ended March 31
   
2021
 
2020
Sales revenue
  $2,978,310   $2,687,000
Cost of goods solda
  1,521,880   1,422,100
Gross margin
  1,456,430   1,264,900
Operating expenses
  853,970   779,230
Income before income taxes
  602,460   485,670
Income taxes (40%)
  240,984   194,268
Net income
  $361,476   $291,402
         
aDepreciation charges on the plant and equipment of $100,150 and $102,620 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.


(a)

Compute the following items for Sage 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 $1,700,920 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.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education