letter c

The balance sheet and income statement of Cookie & Coffee Creations Inc. for its first year of operations, the year ended October 31, 2021, follows. COOKIE & COFFEE CREATIONS INC. Balance Sheet October 31, 2021 Assets Current assets Cash $86,219 Accounts receivable 3,250 Inventory 17,897 Prepaid expenses 6,300 Property, plant, and equipment Furniture and fixtures Accumulated depreciation-furniture and fixtures 11,250 Computer equipment Accumulated depreciation-computer equipment 3,600 Kitchen equipment Accumulated depreciation-kitchen equipment 26,950 Total assets Current liabilities $5,848 19,690 700 2.250 188 4000 $12,500 Accounts payable Income tax payable Dividends payable Salaries and wages payable Interest payable Note payable-current portion Long-term liabilities Note payable-long-term portion Total liabilities Stockholders' equity Paid-in capital Preferred stock, 2,800 shares issued and outstanding (1.250) 4,200 (600) 29,000 (2050) Liabilities and Stockholders' Equity $14,000 $113,666 41.800 $155,466 $32,676 6,000 38.676 Paid-in capital Preferred stock, 2,800 shares issued and outstanding Common stock, 25,930 shares issued, 25,180 outstanding Retained earnings Total paid-in capital and retained earnings Less: Treasury stock (750 common shares) Total stockholders' equity Total liabilities and stockholders' equity COOKIE & COFFEE CREATIONS INC. Income Statement Year Ended October 31, 2021 $92.500 3,900 35,987 $14,000 25,930 Sales revenue Cost of goods sold Gross profit Operating expenses Salaries and wages expense Depreciation expense Other operating expenses Income from operations Other expenses 39,930 77,360 117,290 500 116,790 $155,466 $462,500 231,250 231,250 132,387 98,863 Interest expense 413 Income before income tax - 98,450 Income tax expense 19,690 Net income $78,760 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 semiannual installment payments of $2,500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. 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 semiannual installment payments of $2.500 on May 1 and November 1 of each year, plus interest of 5% on the outstanding balance. (a) Your Answer Correct Answer (Used) Calculate the following ratios (use ending balances in place of averages, where necessary): (Round current ratio to 2 decimal places, eg. 1.68:1. Round times interest earned to 0 decimal places, eg. 125. Round percentages to 1 decimal place, eg. 12.1% and round other answers to 1 decimal place, eg. 12.1.) 1. Current ratio 3.48 11 2 Accounts receivable turnover times 3 times Inventory turnover 12.9 4. Debt to assets 24.9 % 5 Times interest earned 239 times 6. Gross profit rate 50.0 % Profit margin 17.0 % Asset turnover 30 times Return on assets 50.7 % Return on common stockholders' equity 75.3 % (c) Based on your analysis in part (a), do you think a bank would lend Cookie & Coffee Creations Inc. $20,000 to buy the additional equipment? Save for Later Attempts of used 7. 8. 9. 10