Question
The following financial information is for Priscoll Company. Priscoll Company Balance Sheets December 31 Assets 2020 2019 Cash $ 70,000 $ 65,000 Debt investments (short-term)
The following financial information is for Priscoll Company.
Priscoll Company Balance Sheets December 31 | ||||||
Assets | 2020 | 2019 | ||||
Cash | $ 70,000 | $ 65,000 | ||||
Debt investments (short-term) | 55,000 | 40,000 | ||||
Accounts receivable | 104,000 | 90,000 | ||||
Inventory | 230,000 | 165,000 | ||||
Prepaid expenses | 25,000 | 23,000 | ||||
Land | 130,000 | 130,000 | ||||
Building and equipment (net) | 260,000 | 185,000 | ||||
Total assets | $874,000 | $698,000 | ||||
Liabilities and Stockholders Equity | ||||||
Notes payable (short-term) | $170,000 | $120,000 | ||||
Accounts payable | 65,000 | 52,000 | ||||
Accrued liabilities | 40,000 | 40,000 | ||||
Bonds payable, due 2023 | 250,000 | 170,000 | ||||
Common stock, $10 par | 200,000 | 200,000 | ||||
Retained earnings | 149,000 | 116,000 | ||||
Total liabilities and stockholders equity | $874,000 | $698,000 |
Priscoll Company Income Statement For the Years Ended December 31 | ||||||||
2020 | 2019 | |||||||
Sales revenue | $882,000 | $790,000 | ||||||
Cost of goods sold | 640,000 | 575,000 | ||||||
Gross profit | 242,000 | 215,000 | ||||||
Operating expenses | 190,000 | 167,000 | ||||||
Net income | $ 52,000 | $ 48,000 |
Additional information:
1. | Inventory at the beginning of 2019 was $115,000. | |
2. | Accounts receivable (net) at the beginning of 2019 were $86,000. | |
3. | Total assets at the beginning of 2019 were $660,000. | |
4. | No common stock transactions occurred during 2019 or 2020. | |
5. | All sales were on account. |
Indicate, by using ratios, the change in liquidity and profitability of Priscoll Company from 2019 to 2020
2019 | 2020 | |||||
LIQUIDITY | ||||||
Current ratio | :1 | :1 | ||||
Accounts receivable turnover | times | times | ||||
Inventory turnover | times | times | ||||
PROFITABILITY | ||||||
Profit margin | % | % | ||||
Asset turnover | times | times | ||||
Return on assets | % | % | ||||
Earnings per share | $ | $ |
eTextbook and Media
The following are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2020, and (2) as of December 31, 2021, after giving effect to the situation. (Round debt to assets ratio to 0 decimal places, e.g. 15% and other answers to 1 decimal place, e.g. 6.8 or 6.8%.)
Situation | Ratio | |||
(1) | 18,000 shares of common stock were sold at par on July 1, 2021. Net income for 2021 was $54,000. | Return on common stockholders equity | ||
(2) | All of the notes payable were paid in 2021. All other liabilities remained at their December 31, 2020, levels. At December 31, 2021, total assets were $900,000. | Debt to assets ratio | ||
(3) | The market price of common stock was $9 and $12 on December 31, 2020 and 2021, respectively. Net income for 2021 was $54,000. | Price-earnings ratio |
2020 | 2021 | |||||
Return on common stockholders equity | % | % | ||||
Debt to assets ratio | % | % | ||||
Price-earnings ratio | times | times |
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