The comparative balance sheet of Cookie & Coffee Creation Inc. at October 31, 2020 for the years
Question:
The comparative balance sheet of Cookie & Coffee Creation Inc. at October 31, 2020 for the years 2020 and 2019, and the income statement for the years of October 31, 2019 and 2020, are presented below:
Additional information:
Natalie and Curtis are thinking about borrowing an additional $20,000 to buy more kitchen equipment. The loan would be repaid over a 4-year period. The terms of the loan provide for equal semi-annual payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance.
Calculate the following ratios for 2019 and 2020. (Round current ratio to 2 decimal places, e.g 12.61, debt ot assets and gross profit rate to 0 decimal places, e.g. 12 and all other answers to 1 decimal place e.g. 12.6%.)
Prepare a horizontal analysis of the income statement for Cookie & Coffee Creations Inc. using 2019 as a base year. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -12.25% or (55,000), (12.25%). Round percentages to 0 decimal places, e.g. 12%.)
Prepare a vertical analysis of the income statement for Cookie & Coffee Creations Ins, for 2020 and 2019. (Round percentages to 2 decimal places, e.g. 12.25%. Do not leave any answer field blank. Enter 0 for amounts.)
What impact would borrowing and additional $20,000 to buy more equipment have on each of the ratios in (a) above, assuming that no changes are expected on the income statement and balance sheet?
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren