Question
Healthy Body Nursing Home, Inc. Statement of Income and Retained Earnings Year Ended December 31, 2020 Revenue: Resident services revenue: $3,163,258 Provision for bad debts:
Healthy Body Nursing Home, Inc. Statement of Income and Retained Earnings Year Ended December 31, 2020
Revenue:
Resident services revenue: $3,163,258
Provision for bad debts: 110,000
Net resident services revenue: 3,053,258
Other revenue: 106,146
Total revenues: $3,159,404
Expenses: Salaries and benefits: $1,515,438
Medical supplies and drugs: 966,781
Insurance and other: 296,357
Depreciation: 85,000 Interest: 206,780
Total expenses: $3,070,356
Operating income: $ 89,048
Income tax expense: 31,167
Net income: $ 57,881
Retained earnings, beginning of year: $ 199,961
Retained earnings, end of year: $ 257,842
Healthy Body Nursing Home, Inc. Balance Sheet December 31, 2020 ASSETS
Current assets: Cash: $105,737
Short-term securities: 200,000
Net accounts receivable: 215,600
Supplies: 87,655
Total current assets: $ 608,992
Property and equipment: 2,250,000
Less: Accumulated depreciation: 356,000
Net property and equipment: $ 1,894,000
Total assets: $ 2,502,992
LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities Accounts payable: $ 72,250
Accrued expenses: 192,900'
Notes payable: 100,000
Current portion of long-term debt: 80,000
Total current liabilities: $ 445,150
Long-term debt: $ 1,700,000
Shareholders equity
Common stock, $10 par value: $ 100,000
Retained earnings: 257,842
Total shareholders equity: $ 357,842
Total liabilities and shareholders equity: $ 2,502,992
1. Perform a DuPont analysis on Healthy Body Nursing Home, Inc. Be sure to show your work. Assume that the industry average ratios are as follows (10 points possible): - Total margin: 3.5% Total asset turnover: 1.5 o Equity multiplier: 2.5 - Return on equity: 13.1% 2. Calculate and interpret the following ratios. Respond to the following questions. Be sure to show your work. Industry averages have been listed next to each ratio (3 points for each ratio calculation; 24 points total): o Return on assets: 5.2% o Current ratio: 2.0 Days cash on hand: 22 days Average collection period: 19 days o Debt ratio: 71% Debt-to-equity ratio: 2.5 . Tirnes interest earned ratio: 2.6 . Fixed-asset turnover ratio: 1.4Step by Step Solution
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