Question

Cadux Candy Company’s income statement for the year ended December 31, 2021, reported interest expense of $12 million and income tax expense of $122 million. Current assets listed in its balance sheet include cash, accounts receivable, and inventory. Property, plant, and equipment is the company’s only noncurrent asset. Financial ratios for 2021 are listed below. Profitability and turnover ratios with balance sheet items in the denominator were calculated using year-end balances rather than averages.

Debt to equity ratio	0.7
Current ratio	2.0
Acid-test ratio	1.0
Times interest earned ratio	17	times
Return on assets	10	%
Return on equity	17	%
Profit margin on sales	5	%
Gross profit margin (gross profit divided by net sales)	40	%
Inventory turnover	8	times
Receivables turnover	20	times

  
Required:
Prepare a December 31, 2021, balance sheet for the Cadux Candy Company

Answer 1

Cadux Canoy Company
Balance Sheet
At Dec. 31, 2021 (amount in $millions)
Assets		Liabilities
cash	35	current liabilities	105
accounts receivable	70	non-current liability	183
inventory	105
total current assets	210
non-current assets		total liabilities	288
property,plant and equipment	490	stockholders equity	412
total assets	700	total liabilities and stockholders equity	700

please refer to the below calculations for getting the above figures

times interest earned ratio	EBIT/interest expense
times interest earned ratio	17
interest expense	12
EBIT (times interest earned*interest expense)	204
EBIT	204
less:interest expense	-12
EBT	192
less:tax	-122
net income	70
profit margin on sales	(net income / sales)*100
profit margin on sales	5%
net income	70
sales	1400
gross profit margin	(gross proift / sales)*100
gross profit margin	40%
sales	1400
gross profit	560
cost of goods sold (sales*60%)	840
inventory turnover ratio	cost of goods sold / ending inventory
inventory turnover ratio	8
cost of goods sold	840
ending inventory	105
receiables turnover ratio	sales / ending receivable
receiables turnover ratio	20
sales	1400
ending receivable	70
return on equity	net income / shareholders equity
return on equity	17%
net income	70
shareholders equity	412
return on assets	net income / total assets
return on assets	10%
net income	70
total assets	700
debt equity ratio	total liabilities / shareholders equity
debt equity ratio	0.7
shareholders equity	412
total liabilities	288
current ratio	current assets / current liabilites
current ratio	2
current liabilities	current assets/2
current asset	cash+accounts receivable+inventory
acid test ratio	quick assets / current liabilities
acid test ratio	1
current liabilites	quick assets
quick assets	cash+accounts receivable
(cash+70+105)/2	cash + 70
cash+70+105	2cash+140
cash	35

sales	1400
less:cost of goods sold	-840
gross profit	560
less:operating expenses	-356
EBIT	204
less:interest expenses	12
EBT	192
less:tax	-122
net income	70