ACC 210 Accounting Concept II

Assignment 1

Spring Semester 2022

Question 1

The following figures have been extracted from the final accounts of YSL Limited, a manufacturer of building materials. The company has an authorized equity of $800,000 made up of 550,000 common stocks at $1 each and 250,000 8% preference stock at $1 each. YSL Limited, has already issued 400,000 common stocks and all the 8% preference stock.

Income Statement for vear ended

31/12/2017

Ratios and information for year ended

31/12/2016

Sales

Costs of goods sold

Operating expenses for year

Interest for year

Net Profit for year

Dividends paid

Profit and Loss Balance 1/1/2017

Profit and Loss Balance 31/12/2017

930.000

(630,000)

(200,000)

(16,000)

84.000

(45,000)

65,000

104.000

Earnings per Common Stock

Dividend per Common Stock

Interest cover

Ouick Ratio

Market Value of one Common Stock $1.35

Return on Capital Employed

Gearing

Dividend cover

Dividend yield

18c

5c

8 times

1.1:1

9%

40%

3 times

6%

Balance Sheet as at 31/12/2017

Intangible Assets

Tangible Assets

Investments (market value $160,000)

Current Assets (Closing inventory $64,000)

Account Payable

180,000

(166,000)

130,000

600,000

170,000

900,000

14,000

914,000

160,000

10% Bonds (2021/2022)

Equity

Common Stock a S1 each

8% Preference Stock @ $1 each

Profit and Loss Balance

Market Value of one Common Stock $1.30.

400,000

250,000

104,000

754.000

914.000

You are required to calculate the following for 2017:

1. The opening inventory if the rate of inventory turnover is 10 (based on average inventory).
2. Gross Profit Ratio.
3. Net Profit Ratio.
4. Current Ratio.
5. Quick Ratio or Acid-test Ratio.
6. Account Payable Repayment Period (in days).
7. The Dividend Yield.
8. The Price/Earnings ratio.
9. The earnings per common stock in 2017.
10. How long would it take one common stock to recoup (recover) its 2017 market price based on present dividend payout rate?

(100 marks)

Question 1

Indicate whether the common stockholders should be satisfied with the performance of the company, state of affairs and prospects of YSL company.

You must use the relevant accounting ratios you obtained in Assignment 1 and other information to support your arguments.

Question 2

A rising liquidity ratio is a sign of prudent management. Discuss briefly.

(80 marks)

(20 marks)

ACC 210 Accounting Concept II Assignment 1 Spring Semester 2022 Questien 1 The following figures have been extracted from the firul accounts of YSL. Limited, a manufacturer of building materials. The compuny tas an authorized equily of 5500,000 made up of 550,000 comrnon stocks at 51 each and 250.0008% preference stock at 51 each. Y5L. Limited, has already issued 400,000 common stocks and all the 8% preferenoe stock. You are reqaired to calculate the following for 2017 : 1) The epening imventory if the rate of inventory tumever is 10 (based en average imventory). 2) Gross Profit Ratio. 3) Net Profit Rabo. 4) Current Ratio. 5) Quick Ratio or Acid-test Ratio. 6) Account Payable Repayment Pericd (ia days). 7) The Dividend Yield. 8) The PricelFarninge ratie. 9) The carnings per common stock in 2017 . 10) How long would it take one common stock to recosp (recover) its 2017 market price based on present dividend pryout rate? (100 marks)