Question
Please calculate the current ratio and acid test from the balance sheet and income statement below. I am not sure what I am doing wrong
Please calculate the current ratio and acid test from the balance sheet and income statement below.
I am not sure what I am doing wrong here to calculate the current ratio and acid test ratio for 2017 and 2018. Do I need to include the current notes payable due this within the year as a current liability ?
Marin Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Marin and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,920 notes, which are due on June 30, 2018, and September 30, 2018. Another note of $5,970 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Marins cash flow problems are due primarily to the companys desire to finance a $300,720 plant expansion over the next 2 fiscal years through internally generated funds.
The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.
Balance Sheet | ||
2018 | 2017 | |
Assets | ||
Cash | 18,120 | 12,410 |
N/R | 148,700 | 130,840 |
A/R | 132,830 | 125,880 |
Inventories | 104,150 | 50,010 |
PPE | 1,440,600 | 1,429,490 |
Total assets | 1,844,400 | 1,748,630 |
Liabilities and Stockholders Equity | ||
A/P | 78,220 | 90,330 |
N/P | 75,500 | 61,590 |
Accrued Liab | 2,760 | 23,230 |
C/S | 1,298,610 | 1,290,550 |
RE | 389,310 | 282,930 |
Total Liab and SE | 1,844,400 | 1,748,630 |
aCash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018. | ||
Income Statement | ||
2018 | 2017 | |
Sales Revenue | 2,992,720 | 2,693,360 |
COGS | 1,514,810 | 1,418,870 |
Gross Margin | 1,477,910 | 1,274,490 |
Operating Exp. | 856,040 | 775,840 |
Income before | 621,870 | 498,650 |
taxes | ||
Income taxes | 248,748 | 199,460 |
Net Income | 373,122 | 299,190 |
INcome statement - Depreciation charges on the plant and equipment of $100,020 and $102,710 for fiscal years ended March 31, 2017 and 2018, respectively, are included in cost of goods sold.
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