Question
Question 1 The following ratios have been computed for Cola Company for 2017. Profit margin 12.5% Times interest earned 8 times Receivables turnover 4 times
Question 1
The following ratios have been computed for Cola Company for 2017.
Profit margin 12.5%
Times interest earned 8 times
Receivables turnover 4 times
Acid-test ratio 2 : 1
Current ratio 3 : 1
Debt to assets ratio 20%
Mason Companys 2017 financial statements with missing information follow:
MASON COMPANY
Comparative Balance Sheet
December 31,
Assets 2017 2016
Cash............................................................................................. $ 30,000 $ 45,000
Short-term Investments............................................................... 10,000 25,000
Accounts receivable (net)............................................................ ? (6) 40,000
Inventory..................................................................................... ? (8) 50,000
Property, plant, and equipment (net)........................................... 200,000 160,000
Total assets........................................................................... $ ? (9) $320,000
Liabilities and stockholders' equity
Accounts payable......................................................................... $ ? (7) $ 30,000
Short-term notes payable............................................................. 40,000 35,000
Bonds payable............................................................................. ? (10) 20,000
Common stock............................................................................. 220,000 200,000
Retained earnings........................................................................ 60,000 35,000
Total liabilities and stockholders' equity.............................. $ ? (11) $320,000
MASON COMPANY
Income Statement
For the Year Ended December 31, 2017
Net sales....................................................................................... $200,000
Cost of goods sold....................................................................... 75,000
Gross profit.................................................................................. 125,000
Expenses:
Depreciation expense............................................................. $ ? (5)
Interest expense..................................................................... 5,000
Selling expenses..................................................................... 8,000
Administrative expenses........................................................ 12,000
Total expenses.................................................................. ? (4)
Income before income taxes........................................................ ? (2)
Income tax expense............................................................... ? (3)
Net income................................................................................... $ ? (1)
Required
Use the above ratios and information from the Mason Company financial statements to fill in
the missing information on the financial statements. Follow the sequence indicated. Show
computations that support your answers.
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