Additional information of 2019 is available: 1. Dividends declared during 2019 were $60,000. 2. Land was acquired by the issuance of $2,000,000 common shares on Jan 2, 2020. 3. Machine was sold for $20,000. The machine had a cost of $90,000 and its accumulated depreciation was $80,000. 4. A new machine costing $500,000 was acquired by paying $300,000 cash and the balance by the issuance of bond. 5. Net sales was $1,000,000 and costs of goods sold was $500,000 6. Net income (Net profit) for year 2019 was $283,000. 7. Number of outstanding shares in 2019 is 300,000 8. Market price of shares at Dec 31, 2019 is $8.80. Required: (a) Using the information for Shine Company, compute the following ratios for 2019: (2 decimal points) - (21 marks) 1. Current ratio 2. Quick ratio 3. Accounts Receivable turnover 4. Debt ratio 5. Inventory turnover 6. Earnings per share 7. Price-earnings Ratio (b) (9 marks) Carter Corporation financed construction of some new facilities with a large long- term note payable. As a condition of obtaining the loan, Carter agreed to maintain a current ratio at year-end of at least 1.7 to 1. If Carter fails to maintain this ratio, the lender may demand immediate repayment of the principal amount of the note and all unpaid accrued interest. As the end of the year approaches, Carter is concerned about the magnitude of its current ratio. Suggest some actions (at least two) that the company might take to increase the magnitude of the current ratio. Question 3 (30 marks) Shine Company produces motors. The followings show the Company's comparative balance sheets of 2019 and 2018, Shinc Company Comparative Balance Sheet December 31, 2019 and 2018 Land Accounts receivable (net) Inventory Prepaid expenses Cash Machinery Accumulated depreciation machinery Total Assets 2019 2018 $ 2.800.000 300,000 180.000 220,000 250.000 180,000 76.000 105,000 600,000 450,000 1,070,000 400,000) 330,000) 4.575.000 2186.12 160,000 Liabilities and Stockholders Equity Liabilities Accounts Payable Income taxes Payable Dividends Payable Long-term Notes Payable Bonds Payable Total Liabilities 20,000 200,000 200.000 1.120,000 185,000 65.000 3.000 100.000 500.00 355.000 3.000.000 1,000,000 Stockholders Egi Common stock Retained Eamings Total Stockholders' Equity Total liabilities and stockholders' equity 3.456.000 4.575.000 1233.00 20861 Additional information of 2019 is available: 1. Dividends declared during 2019 were $60,000 2. Land was acquired by the issuance of S2,000,000 common shares on Jan 2, 2020 3. Machine was sold for $20,000. The machine had a cost of $90,000 and its accumulated depreciation was $80,000 4. A new machine costing $500,000 was acquired by paying $300,000 cash and the balance by the issuance of bond 5. Net sales was $1,000,000 and costs of goods sold was $500,000 6. Net income (Net profit for year 2019 was $283.000 December 31, 2019 and 2018 $ Assets: Land Accounts receivable (net) Inventory Prepaid expenses Cash Machinery Accumulated depreciation: machinery Total Assets 2019 2018 S 2,800,000 800,000 180,000 220,000 250,000 180,000 76,000 106,000 600,000 450,000 1,070,000 660,000 (400,000) (330,000) 4.576.000 2.086.000 Liabilities and Stockholders' Equity: Liabilities: Accounts Payable Income taxes Payable Dividends Payable Long-term Notes Payable Bonds Payable Total Liabilities 160,000 40,000 20,000 200,000 700,000 1,120,000 185,000 65,000 3,000 100,000 500,000 853,000 Stockholders 'Equity: Common stock Retained Earnings Total Stockholders' Equity Total liabilities and stockholders' equity 3,000,000 456,000 3,456,000 4.576.000 1,000,000 233.000 1.233.000 2.086.000
