Question
The following financial statements were prepared by Mystery Inc. for the year ended December 31, 2018. Also presented are various financial statement ratios for Mystery
The following financial statements were prepared by Mystery Inc. for the year ended December 31, 2018. Also presented are various financial statement ratios for Mystery Inc as calculated from the prior year's financial statements. Sales represent net credit sales. The total assets and the receivables and inventory balances at December 31, 2018, were the same as at December 31, 2017.
Mystery Inc. | |||||||||||||||||
Balance Sheet | |||||||||||||||||
December 31, 2018 | |||||||||||||||||
Assets: | Liabilities and Capital | ||||||||||||||||
Cash | $ | 840,000 | Accounts payables | $ | 660,000 | ||||||||||||
Receivables | 400,000 | Notes payable | 100,000 | ||||||||||||||
Inventory | 700,000 | Other current liabilities | 140,000 | ||||||||||||||
Total current assets | $ | 1,940,000 | Total current liabilities | $ | 900,000 | ||||||||||||
Plant and equipmentnet | 760,000 | Long-term debt | 450,000 | ||||||||||||||
Common stock | 450,000 | ||||||||||||||||
Retained earnings | 900,000 | ||||||||||||||||
Total assets | $ | 2,700,000 | Total liabilities and capital | $ | 2,700,000 | ||||||||||||
Mystery Inc. | |||||||||||||||||
Income Statement | |||||||||||||||||
Year Ended December 31, 2018 | |||||||||||||||||
Sales | $ | 4,000,0000 | |||||||||||||||
Cost of goods sold | |||||||||||||||||
Material | $ | 900,000 | |||||||||||||||
Labor | 700,000 | ||||||||||||||||
Overhead | 600,000 | 2,200,000 | |||||||||||||||
Gross margin | $ | 1,800,000 | |||||||||||||||
Selling expenses | $ | 540,000 | |||||||||||||||
General and administrative expenses | 300,000 | 840,000 | |||||||||||||||
Operating income | $ | 960,000 | |||||||||||||||
Less interest expense | 90,000 | ||||||||||||||||
Income before taxes | $ | 870,000 | |||||||||||||||
Less federal income taxes | 304,000 | ||||||||||||||||
Net income | $ | 566,000 | |||||||||||||||
Required:
Items 1 through 9 below represent financial ratios that the auditor calculated during the prior year's audit. For each ratio, calculate the current year's ratio from the financial statements presented above.
Calculations | 12/31/2018 | 12/31/2017 | |||
1. | Current ratio | 2.5 | |||
2. | Quick ratio | 1.3 | |||
3. | Accounts receivable turnover | 5.5 | |||
4. | Inventory turnover | 2.5 | |||
5. | Total asset turnover | 1.2 | |||
6. | Gross margin percentage | 35 | % | ||
7. | Net operating margin % | 25 | % | ||
8. | Times interest earned | 10.3 | |||
9. | Total debt to equity | 50 | % |
I need help with 5 through 9 thanks
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