Question
Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2017 and 2016. Sales for the year ended December 31, 2017, totaled
Presented here are the comparative balance sheets of Hames, Inc., at December 31, 2017 and 2016. Sales for the year ended December 31, 2017, totaled $650,000.
| HAMES, INC., Balance Sheets December 31, 2017 and 2016 | ||||||||||
| 2017 | 2016 | |||||||||
| Assets | ||||||||||
| Cash | $ | 25,000 | $ | 20,000 | ||||||
| Accounts receivable | 78,000 | 72,000 | ||||||||
| Merchandise inventory | 103,000 | 99,000 | ||||||||
| Total current assets | $ | 206,000 | $ | 191,000 | ||||||
| Land | 50,000 | 40,000 | ||||||||
| Plant and equipment | 125,000 | 110,000 | ||||||||
| Less: Accumulated depreciation | (65,000 | ) | (60,000 | ) | ||||||
| Total assets | $ | 316,000 | $ | 281,000 | ||||||
| Liabilities | ||||||||||
| Short-term debt | $ | 18,000 | $ | 17,000 | ||||||
| Accounts payable | 66,400 | 75,500 | ||||||||
| Other accrued liabilities | 20,000 | 18,000 | ||||||||
| Total current liabilities | $ | 104,400 | $ | 110,500 | ||||||
| Long-term debt | 22,000 | 30,000 | ||||||||
| Total liabilities | $ | 126,400 | $ | 140,500 | ||||||
| Stockholders Equity | ||||||||||
| Common stock, no par, 100,000 shares authorized 40,000 and 25,000 shares issued, respectively | $ | 74,000 | $ | 59,000 | ||||||
| Retained earnings: | ||||||||||
| Beginning balance | $ | 81,500 | $ | 85,000 | ||||||
| Net income for the year | 54,100 | 1,500 | ||||||||
| Dividends for the year | (20,000 | ) | (5,000 | ) | ||||||
| Ending balance | $ | 115,600 | $ | 81,500 | ||||||
| Total stockholders equity | $ | 189,600 | $ | 140,500 | ||||||
| Total liabilities and stockholders equity | $ | 316,000 | $ | 281,000 | ||||||
| | ||||||||||
Required:
a. Calculate ROI for 2017. (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
b. Calculate ROE for 2017. (Round your answer to 1 decimal place.)
c. Calculate working capital at December 31, 2017.
d. Calculate the current ratio at December 31, 2017. (Round your answer to 2 decimal places.)
e. Calculate the acid-test ratio at December 31, 2017. (Round your answer to 2 decimal places.)
f. Assume that on December 31, 2017, the treasurer of Hames, Inc., decided to pay $15,000 of accounts payable. What impact, if any, this receipt will have on the answers you calculated for requirements a-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
| Increase | |
| Decrease | |
| No effect |
b. ROE for the year ended December 31, 2017:
| Decrease | |
| No effect | |
| Increase |
c.Working capital as at December 31, 2017:
| No effect | |
| Increase | |
| Decrease |
d. Current ratio as at December 31, 2017:
| Decrease | |
| No effect | |
| Increase |
g. Assume that instead of paying $15,000 of accounts payable on December 31, 2017. Hames, Inc., collected $15,000 of accounts receivable. What impact, if any, this receipt will have on the answers you calculated for requirements a-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
| No effect | |
| Increase | |
| Decrease |
b. ROE for the year ended December 31, 2017:
| Increase | |
| Decrease | |
| No effect |
c. Working capital as at December 31, 2017:
| Decrease | |
| No effect | |
| Increase |
d. Current ratio as at December 31, 2017:
| Decrease | |
| Increase | |
| No effect |
rev: 05_26_2016_QC_CS-52318
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