Incomplete Statements; Analysis of Ratios [LO2, LO3, LO4]

Incomplete financial statements for Tanner Company are given below:

Tanner Company Income Statement For the Year Ended December 31 Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,700,000 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . ?
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Selling and administrative expenses . . . . . . . . ?
Net operating income . . . . . . . . . . . . . . . . . . . . ?
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . 45,000 Net income before taxes . . . . . . . . . . . . . . . . . . ?
Income taxes (40%) . . . . . . . . . . . . . . . . . . . . . . ?
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ?

Tanner Company Balance Sheet December 31 Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ?
Accounts receivable, net . . . . . . . . . . . . . . . . ?
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Total current assets . . . . . . . . . . . . . . . . . . . . . ?
Plant and equipment, net . . . . . . . . . . . . . . . . . ?
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ?
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . $250,000 Bonds payable, 10% . . . . . . . . . . . . . . . . . . . . . ?
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . ?
Stockholders’ equity:
Common stock, $2.50 par value . . . . . . . . . ?
Retained earnings . . . . . . . . . . . . . . . . . . . ?
Total stockholders’ equity . . . . . . . . . . . . . . . . . ?
Total liabilities and stockholders’ equity . . . . . . $ ?

The following additional information is available about the company:

a. Selected financial ratios computed from the statements above are given below:
Current ratio . . . . . . . . . . . . . . . . . . . 2.40 Acid-test ratio . . . . . . . . . . . . . . . . . . 1.12 Accounts receivable turnover . . . . . . 15.0 Inventory turnover . . . . . . . . . . . . . . . 6.0 Debt-to-equity ratio . . . . . . . . . . . . . . 0.875 Times interest earned . . . . . . . . . . . . 7.0 Earnings per share . . . . . . . . . . . . . . $4.05 Return on total assets . . . . . . . . . . . . 14%

b. All sales during the year were on account.

c. The interest expense on the income statement relates to the bonds payable; the amount of bonds outstanding did not change throughout the year.

d. There were no changes in the number of shares of common stock outstanding during the year.

e. Selected balances at the beginning of the current year (January 1) were as follows:
Accounts receivable . . . . $160,000 Inventory . . . . . . . . . . . . . $280,000 Total assets . . . . . . . . . . . $1,200,000 Required:
Compute the missing amounts on the company’s financial statements. (Hint: You may find it helpful to think about the difference between the current ratio and the acid-test ratio.)