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Working Capital Requirement 1. Compute Current Debt-to- these ratios: Ratio Cash Ratio Debt Ratio Equity Ratio Round ratios to two decimal places or format as percentages or Accounts Days Sales Gross Profit Receivable Days Sales in Inventory currency as appropriate. Inventory in Turnover Percentage Turnover Receivables

Working Capital Requirement 1. Compute Current Debt-to- these ratios: Ratio Cash Ratio Debt Ratio Equity Ratio Round ratios to two decimal places or format as percentages or Accounts Days Sales Gross Profit Receivable Days Sales in Inventory currency as appropriate. Inventory in Turnover Percentage Turnover Receivables

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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Requirement 1. Compute Current Working Debt-to- these ratios: Ratio Capital Cash Ratio Debt Ratio Equity Ratio Round ratios to two decimal places or format as percentages or Accounts Days Sales Inventory Days Sales in Inventory Gross Profit Receivable Percentage currency as appropriate. in Turnover Turnover Receivables 2019 Total Assets = Rate of Rate of Asset Return on Stockholders'| Earnings Equity Return on Turnover Total Assets Ratio Per Share 2019 SHE = Price/ *Current Stock Price is Earnings Dividend $10.00 per share Ratio* Dividend Yield Рayout Dividend per share= Requirement 2. Based on the ratios computed above, analyze the company's ability to pay its debts (both current and long term). Refer to at least 3 specific ratios in your analysis. Requirement 3: Based on the ratios computed above, analyze the company's management of inventory. Refer to at least 2 specific ratios in your analysis. Requirement 4: Based on the ratios computed above, analyze the company's management of receivables. Refer to at least 2 specific ratios in your analysis.
Transcribed Image Text:Requirement 1. Compute Current Working Debt-to- these ratios: Ratio Capital Cash Ratio Debt Ratio Equity Ratio Round ratios to two decimal places or format as percentages or Accounts Days Sales Inventory Days Sales in Inventory Gross Profit Receivable Percentage currency as appropriate. in Turnover Turnover Receivables 2019 Total Assets = Rate of Rate of Asset Return on Stockholders'| Earnings Equity Return on Turnover Total Assets Ratio Per Share 2019 SHE = Price/ *Current Stock Price is Earnings Dividend $10.00 per share Ratio* Dividend Yield Рayout Dividend per share= Requirement 2. Based on the ratios computed above, analyze the company's ability to pay its debts (both current and long term). Refer to at least 3 specific ratios in your analysis. Requirement 3: Based on the ratios computed above, analyze the company's management of inventory. Refer to at least 2 specific ratios in your analysis. Requirement 4: Based on the ratios computed above, analyze the company's management of receivables. Refer to at least 2 specific ratios in your analysis.
Solar Solutions began operations on January 1, 2015, and is now in its sixth year of operations. It is a retail sales company with a large amount of online sales. The adjusted trial balance as of December 31, 2020 appears below, along with prior year balance sheet data and some additional transaction data for 2020. SOLAR SOLUTIONS Adjusted Trial Balance 12/31/2020 2020 2019 Account Title Adjusted Trial Balance Post-Closing Trial Balance $ 125,600 Debit Credit Debit Credit 35,000 Cash 122,200 125,600 6,000 Accounts Receivable 55,000 35,000 15,600 47,000 21,000 Prepaid Insurance 5,000 6,000 Inventory 46,000 15,600 Office Equipment Machinery & Tools Accumulated Depreciation Accounts Payable Salaries Payable |Sales Tax Payable Note Payable-Long Term Common Stock, $10 par Retained Earnings 63,000 47,000 (16,000) 59,000 21,000 $ 234,200 $ 21,000 16,000 11,200 16,800 2,600 2,700 2,000 4,000 31,000 22,100 240,000 160,000 28,600 28,600 Dividends 10,000 Sales Revenue Cost of Goods Sold 235,000 127,600 Rent Expense Salaries Expense Insurance Expense Advertising Expense Depreciation Expense Interest Expense 20,000 36,000 11,800 6,000 5,000 1,800 Income Tax Expense 3,000 $ 571,400 $ 571,400 $ 250,200 250,200 Transaction Data for 2020 (Note, these transactions were included in the trial balance numbers above.) Cash paid for purchase of office equipment Cash paid for purchase of tools Acquisition of Machinery with Notes Payable-Long-term Payment on Long Term Debt Cash payment of dividends 6,000 10,000 38,000 ? 10,000 Cash receipt from issuance of 10,000 shares of common stock 80,000
Transcribed Image Text:Solar Solutions began operations on January 1, 2015, and is now in its sixth year of operations. It is a retail sales company with a large amount of online sales. The adjusted trial balance as of December 31, 2020 appears below, along with prior year balance sheet data and some additional transaction data for 2020. SOLAR SOLUTIONS Adjusted Trial Balance 12/31/2020 2020 2019 Account Title Adjusted Trial Balance Post-Closing Trial Balance $ 125,600 Debit Credit Debit Credit 35,000 Cash 122,200 125,600 6,000 Accounts Receivable 55,000 35,000 15,600 47,000 21,000 Prepaid Insurance 5,000 6,000 Inventory 46,000 15,600 Office Equipment Machinery & Tools Accumulated Depreciation Accounts Payable Salaries Payable |Sales Tax Payable Note Payable-Long Term Common Stock, $10 par Retained Earnings 63,000 47,000 (16,000) 59,000 21,000 $ 234,200 $ 21,000 16,000 11,200 16,800 2,600 2,700 2,000 4,000 31,000 22,100 240,000 160,000 28,600 28,600 Dividends 10,000 Sales Revenue Cost of Goods Sold 235,000 127,600 Rent Expense Salaries Expense Insurance Expense Advertising Expense Depreciation Expense Interest Expense 20,000 36,000 11,800 6,000 5,000 1,800 Income Tax Expense 3,000 $ 571,400 $ 571,400 $ 250,200 250,200 Transaction Data for 2020 (Note, these transactions were included in the trial balance numbers above.) Cash paid for purchase of office equipment Cash paid for purchase of tools Acquisition of Machinery with Notes Payable-Long-term Payment on Long Term Debt Cash payment of dividends 6,000 10,000 38,000 ? 10,000 Cash receipt from issuance of 10,000 shares of common stock 80,000
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