Question

A condensed balance sheet for Bradford Corporation prepared at the end of the year appears as follows.

Assets					Liabilities & Stockholders' Equity
Cash	$	104,000			Notes payable (due in 6 months)	$	45,000
Accounts receivable		100,000			Accounts payable		122,000
Inventory		270,000			Long-term liabilities		321,000
Prepaid expenses		60,000			Capital stock, $5 par		300,000
Plant & equipment (net)		570,000			Retained earnings		406,000
Other assets		90,000
Total	$	1,194,000			Total	$	1,194,000

During the year, the company earned a gross profit of $1,116,000 on sales of $2,950,000. Accounts receivable, inventory, and plant assets remained almost constant in amount throughout the year, so year-end figures may be used rather than averages.

a. Compute the current ratio. (Round your answer to 2 decimal place.)

b. Compute the quick ratio. (Round your answer to 2 decimal place.)

c. Compute the working capital.

d. Compute the debt ratio. (Round your percentage answers to nearest whole percent. i.e. 0.1234 as 12%.)

e. Compute the accounts receivable turnover (all sales were on credit). (Round your answer to 2 decimal places.)

f. Compute the inventory turnover. (Round your answer to 2 decimal places.)

g. Compute the book value per share of capital stock. (Round your answer to 2 decimal places.)

Answer 1

a.
Cash	104000
Accounts receivable	100000
Inventory	270000
Prepaid expenses	60000
Current assets	534000
Notes payable (due in 6 months)	45000
Accounts payable	122000
Current liabilities	167000
Current ratio = Current assets / Current liabilities = 534000 / 167000	3.20

b.
Quick ratio = ( Current assets - Inventory - Prepaid expenses ) / Current liabilities = ( 534000 - 270000 - 60000 ) / 167000	1.22
c.
Current assets	534000
(-) Current liabilities	167000
Working capital	367000

d.
Current liabilities	167000
(+) Long-term liabilities	321000
Total liabilities	488000
Debt ratio = Total liabilities / Total assets = 488000 / 1194000	41%

e.
Accounts receivables turnover = Credit sales / Accounts receivable = 2950000 / 100000	29.50
f.
Cost of goods sold = Sales - Gross profit = 2950000 - 1116000	1834000
Inventory turnover = Cost of goods sold / Inventory = 1834000 / 270000	6.79

g.
Capital stock, $5 par	300000
(+) Retained earnings	406000
Total stockholders' equity	706000
Shares outstanding = Capital stock / Par value per share = 300000 / 5	60000
Book value per share of capital stock = Total stockholders' equity / Shares outstanding = 706000 / 60000	11.77