The following financial information is for Vail Company. Additional information: 1. Inventory at the beginning of 2009
Question:
The following financial information is for Vail Company.
Additional information:
1. Inventory at the beginning of 2009 was $115,000.
2. Receivables (net) at the beginning of 2009 were $88,000.
3. Total assets at the beginning of 2009 were $630,000.
4. No common stock transactions occurred during 2009 or 2010.
5. All sales were on account.
Instructions
(a) Indicate, by using ratios, the change in liquidity and profitability of Vail Company from 2009 to 2010.
(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2010, and (2) as of December 31, 2011, after giving effect to the situation. Net income for 2011 was $40,000. Total assets on December 31, 2011, were $900,000.
Situation ...........................................................................Ratio
1. 18,000 shares of common stock were ................Return on common stockholders
sold at par on July 1, 2011. .......................................equity
2. All of the notes payable were paid in 2011. .......Debt to total assets
3. The market price of common stock was .............Price-earnings
$9 and $12 on December 31, 2010
and 2011,respectively.
Step by Step Answer:
Financial Accounting Tools for Business Decision Making
ISBN: 978-0470239803
5th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso