Chapter 12, Problem 33AP

Current ratio, debt ratio, EPS (Learning Objective 2) 20-25 min.

Financial statement data of Helgeson Enterprises. Inc., include the following items:

Cash..........................................................	$ 24,300
Short-Term investments..........................................................	28,100
Accounts Receivable, Net........................................................................	90,600
Inventory...................................................«......	116,800
Prepaid Expenses..............................................................................-................	11, 330
Total Assets.........................................................................................................	662,700
Short-Term Notes payable.................................................................................	50,000
Accounts Payable	78,300
Accrued Liabilities..............................................................................................	32,500
Long-Term Notes Payable...........................................................................	150,000
Other Long Term Liabilities.................................................................	41,200
Net Income.........................................................................................................	82,900
Number of Common Shares Outstanding............................................................	35,000

Requirements

1. 1. Compute Helgeton Enterprise current ratio, debt ratio, and earnings per share. Assume that the company has no preferred stock outstanding. Round all ratios to two decimal places.
2. 2. Compute the same three ratios after evaluating the effect of each of the following independent transactions
   1. a. Purchased merchandise of $35,600 on account, debiting Inventory.
   2. b. Issued 6,000 shares of common stock, receiving cash of $75,000. Use total shares outstanding at year’s end instead of average shares outstanding.
   3. c. Borrowed $45,000 on a long-term note payable.
   4. d. Received cash on account, $12,000

Quick solution

1. Current ratio = 1.69, Debt ratio = 53.12percent, EPS = $2.37

2a. Current ratio = 1.56, Debt ratio = 55.51percent, EPS = $2.37

2b. Current ratio = 2.15, Debt ratio = 47.72percent, EPS = $2.02

2c. Current ratio = 1.97, Debt ratio = 56.10percent, EPS = $2.37

2d. Current ratio = 1.69, Debt ratio = 53.12percent, EPS = $2.37