(L04) (Ratio Computations and Effect of Transactions) Presented below is information related to Carver Inc.

Instructions

(a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information provided indicates differently.
(1) Current ratio.
(2) Inventory turnover.
(3) Accounts receivable turnover.
(4) Earnings per share.
(5) Profit margin on sales.
(6) Return on assets on December 31, 2017.

(b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2017.
(1) Write off an uncollectible account receivable, $2,200.
(2) Purchase additional capital stock for cash.
(3) Pay $40,000 on notes payable (short-term).
(4) Collect $23,000 on accounts receivable.
(5) Buy equipment on account.
(6) Give an existing creditor a short-term note in settlement of account.

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Cash Receivables Less: Allowance Inventory Prepaid insurance Land Equipment (net) CARVER INC. BALANCE SHEET DECEMBER 31, 2017 $ 45,000 Notes payable (short-term) $ 50,000 $110,000 Accounts payable 32,000 15,000 95,000 Accrued liabilities 5,000 170,000 Common stock (par $5) 260,000 8,000 Retained earnings 141,000 20,000 150,000 $488,000 $488,000 CARVER INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $1,400,000 Cost of goods sold Inventory, Jan. 1, 2017 $200,000 Purchases 790,000 Cost of goods available for sale 990,000 Inventory, Dec. 31, 2017 (170,000) Cost of goods sold 820,000 Gross profit on sales Operating expenses Net income 580,000 170,000 $ 410,000