Explanation Calculate the closing accounts receivable : Accounts receivable turnover ratio = Net sales Opening accounts receivable +closing accounts receivable 2 10 = $ 11 , 000 , 000 Opening accounts receivable +closing accounts receivable 2 A verage accounts receivable = $ 11 , 000 , 000 10 = $ 1 , 100 , 000 Opening accounts receivable +closing accounts receivable 2 = $ 1 , 100 , 000 $950,000+closing accounts receivable = $ 2 , 200 , 000 Closing accounts receivable = $ 1 , 250 , 000 Calculate the income before income taxes: Profit margin = Net income Net sales 14.5 = Net income $ 11 , 000 , 000 Net income = $ 11 , 000 , 000 × 14.5 % Net income = $ 1 , 595 , 000 Income before income taxes =$1,595,000+$560,000 = $ 2 , 155 , 000 Calculate the closing assets: Return on assets= Net income Average assets 22 = $ 1 , 595 , 000 Average assets Average assets = $ 1 , 595 , 000 22 × 100 = $ 7 , 250 , 000 $ 7 , 000 , 000 + Closing 2 = $ 7 , 250 , 000 Closing Assets = $ 7 , 500 , 000 Calculate the total current assets: Total current assets =Closing assets 2015 − value of plant in 2015 =$7,500,000 − $ 4 , 620 , 000 = $ 2 , 880 , 000 Calculate the inventory: Inventory = Long term notes payable 2014 − Accounts receivable 2015 − Cash =$2,800,000 − $ 1 , 250 , 000 − $ 450 , 000 = $ 1 , 180 , 000 Calculate the total liabilities: Calculate the total liabilities and stockholders’ equity: The value of total liabilities and stockholders’ equity will be $7,500,000. Calculate the total liabilities: Total liabilities = Total liabilities and stockholders’equity − Total stockholders’equity =$7,500,000 − $ 3 , 400 , 000 = $ 4 , 100 , 000 Calculate the current ratio: Current ratio = Current assets Current liabilities 3

Financial Accounting 9e Binder Ready Version + WileyPLUS Registration Card

9th Edition

ISBN: 9781118855164

Author: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel

Publisher: Wiley (WileyPLUS Products)

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Chapter 14, Problem 14.7AP

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Financial Accounting 9e Binder Ready Version + WileyPLUS Registration Card

Ch. 14 - Prob. 1Q Ch. 14 - 2. Distinguish among the following bases of...Ch. 14 - Prob. 3Q Ch. 14 - 4. (a) If Peoples Company had net income of...Ch. 14 - 5. What is a ratio? What are the different ways of...Ch. 14 - 11. Name the mayor ratios useful in assessing (a)...Ch. 14 - Prob. 7Q Ch. 14 - 8. What do the following classes of ratios...Ch. 14 - 9. What is the difference between the current...Ch. 14 - Prob. 10Q

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