Modern Building Supply sells various building materials to retail outlets. The company has just approached Linden State Bank requesting a $300,000 loan to strengthen the Cash account and to pay certain pressing short-term obligations. The companys financial statements for the most recent two years follow: Modern Building Supply Comparative Balance Sheet This Year Last Year Assets Current assets: Cash $ 65,000 $ 149,000 Marketable securities 0 19,000 Accounts receivable, net 461,000 296,000 Inventory 939,000 583,000 Prepaid expenses 17,000 26,000 Total current assets 1,482,000 1,073,000 Plant and equipment, net 1,654,988 1,518,104 Total assets $ 3,136,988 $ 2,591,104 Liabilities and Stockholders' Equity Liabilities: Current liabilities $ 816,000 $ 435,000 Bonds payable, 11% 604,000 604,000 Total liabilities 1,420,000 1,039,000 Stockholders' equity: Preferred stock, $25 par, 7% 345,000 345,000 Common stock, $10 par 502,000 502,000 Retained earnings 869,988 705,104 Total stockholders' equity 1,716,988 1,552,104 Total liabilities and stockholders' equity $ 3,136,988 $ 2,591,104 Modern Building Supply Comparative Income Statement and Reconciliation This Year Last Year Sales $ 5,002,000 $ 4,363,000 Cost of goods sold 3,857,000 3,433,000 Gross margin 1,145,000 930,000 Selling and administrative expenses 641,000 532,000 Net operating income 504,000 398,000 Interest expense 66,440 66,440 Net income before taxes 437,560 331,560 Income taxes (35%) 153,146 116,046 Net income 284,414 215,514 Dividends paid: Preferred dividends 24,150 24,150 Common dividends 95,380 65,260 Total dividends paid 119,530 89,410 Net income retained 164,884 126,104 Retained earnings, beginning of year 705,104 579,000 Retained earnings, end of year $ 869,988 $ 705,104 During the past year, the company has expanded the number of lines that it carries in order to stimulate sales and increase profits. It has also moved aggressively to acquire new customers. Sales terms are 2/10, n/30. All sales are on account. Assume that the following ratios are typical of companies in the building supply industry: Current ratio 2.5 Acid-test ratio 1.2 Average collection period 18 days Average sale period 50 days Debt-to-equity ratio 0.75 Times interest earned 6.0 Return on total assets 10 % Price-earnings ratio 9 Required: 1. Linden State Bank is uncertain whether the loan should be made. To assist it in making a decision, you have been asked to compute the following amounts and ratios for both this year and last year: a. Working capital. This year Last year Working capital $ $ b. Current ratio. (Round your answers to 2 decimal places.) This year Last year Current ratio c. Acid-test ratio. (Round your answers to 2 decimal places.) This year Last year Acid-test ratio d. Average collection period. (The accounts receivable at the beginning of last year totaled $251,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place. Use 365 days in a year.) This year Last year Average collection period days days e. Average sale period. (The inventory at the beginning of last year totaled $508,000.) (Do not round intermediate calculations. Round your final answers to 1 decimal place. Use 365 days in a year.) This year Last year Average sale period days days f. Debt-to-equity ratio. (Round your answers to 2 decimal places.) This year Last year Debt-to-equity ratio g. Times interest earned. (Round your answers to 1 decimal place.) This year Last year Times interest earned 2. For both this year and last year: a. Present the balance sheet in common-size form. (Round your answers to 1 decimal place. Leave no cells blank - be certain to enter "0" wherever required. Due to rounding, figures may not fully reconcile down a column.) Modern Building Supply Common-Size Balance Sheets This Year Last Year Assets Current assets: Cash % % Marketable securities % % Accounts receivable, net % % Inventory % % Prepaid expenses % % Total current assets % % Plant and equipment, net % % Total assets % % Liabilities and Stockholders' equity Liabilities: Current liabilities % % Bonds payable, 11% % % Total liabilities % % Stockholders' equity: Preferred stock, $25 par, 7% % % Common stock, $10 par % % Retained earnings % % Total stockholders' equity % % Total liabilities and stockholders' equity % % b. Present the income statement in common-size form down through net income.(Input all amounts as positive values. Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Modern Building Supply Common-Size Income Statements This Year Last Year Sales % % Cost of goods sold % % Gross margin % % Selling and administrative expenses % % Net operating income % % Interest expense % % Net income before taxes % % Income taxes % % Net income % %