Question

Please fill in the answers in the pictures.

Problem 13-5A Comparative ratio analysis LO A1, P3 The following information applies to the questions displayed below.] Summary information from the financial statements of two companies competing in the same industry follows Barco Company Company Kyan Kyan Barco Data from the current year's income statement $ 770,000 585,100 7,900 Company Company Data from the current year-end balance sheets Sales $ 880,200 Assets 632,500 Cash $ 19,500 34,000 Cost of goods sold Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses 37,400 9,100 84,440 5,000 57,400Interest expense 13,000 24,300 162,200 210,400 5.11 3.93 14,800 4.51 3.81 /,200 Income tax expense 132,500 Net income 6,950Basic earnings per share 304,400 Plant assets, net 290,000 Cash dividends per share 542,450 Total assets $445,440 $ Beginning-of-year balance sheet data Accounts receivable, net Current notes receivable (trade) $ 29,800 54,200 0 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value $ 61,340 93,300 0 55,600 398,000 80,800 180,000 123,300 42150 101,000 Merchandise inventory 206,000 107,400 382,500 Total assets 206,000 Retained earnings Common stock, $5 par value 180,000 542,450 lotal liabilities and equity $445,440 $ Retained earnings 98,300 93,600

Answer 1

(a)	Current Ratio
Company	Choose Numerator	/	Choose Denominator	=	Current Ratio
	Current assets [Refer working note 1]	/	Current liabilities	=	Current Ratio
Barco	$155,440	/	$61,340	=	2.5	to 1
Kyan	$238,050		$93,300	=	2.6	to 1

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(b)	Acid Test Ratio
Company	Choose Numerator					/	Choose Denominator	=	Acid Test Ratio
	Cash	+	Short-term Investments	+	Current receivables [Refer working note 2]	/	Current Liabilities	=	Acid Test Ratio
Barco	$19,500	/		+	$46,500	/	$61,340	=	1.1	to 1
Kyan	$34,000	/		+	$64,600	/	$93,300	=	1.1	to 1

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(c)	Accounts Receivable Turnover
Company	Choose Numerator	/	Choose Denominator	=	Accounts Receivable Turnover
	Net Sales	/	Average accounts receivables, net [Refer working note 3]	=	Accounts Receivable Turnover
Barco	$770,000	/	$38,150	=	20.2	times
Kyan	$880,200	/	$59,400	=	14.8	times

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(d)	Inventory Turnover
Company	Choose Numerator	/	Choose Denominator	=	Inventory Turnover
	Cost of Goods Sold	/	Average Inventory [Refer working note 4]	=	Inventory Turnover
Barco	$585,100	/	$70,020	=	8.4	times
Kyan	$632,500	/	$119,950	=	5.3	times

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(e)	Days' Sales in inventory
Company	Choose Numerator	/	Choose Denominator	x	Days	=	Days' Sales in inventory
	Merchandise inventory	/	Cost of Goods Sold	x	365	=	Days' Sales in inventory
Barco	$84,440	/	$585,100	x	365	=	52.7	days
Kyan	$132,500	/	$632,500	x	365	=	76.5	days

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(f)	Days' Sales Uncollected
Company	Choose Numerator	/	Choose Denominator	x	Days	=	Days' Sales Uncollected
	Current receivables, net [Refer working note 2]	/	Net Sales	x	365	=	Days' Sales Uncollected
Barco	$46,500	/	$770,000	x	365	=	22.0	days
Kyan	$64,600	/	$880,200	x	365	=	26.8	days

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Working Note 1 - Calculation of Current assets:
	Barco	Kyan
Current Assets:
Cash	$19,500.00	$34,000.00
Accounts receivables, net	$37,400.00	$57,400.00
Current notes receivables (trade)	$9,100.00	$7,200.00
Merchandise inventory	$84,440.00	$132,500.00
Prepaid expenses	$5,000.00	$6,950.00
Total current assets	$155,440.00	$238,050.00

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Working note 2- Computation of current accounts receivables:
	Barco Company	Kyan Company
Accounts receivables, net	$37,400	$57,400
Current notes receivables, net	$9,100	$7,200
Total Current receivables, net	$46,500	$64,600

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Working note 3 - Computation of average accounts receivables
	Barco	Kyan
Balance at the beginning of the year:
Accounts receivables, Net	$29,800	$54,200
Current notes receivables, net	$0	$0
Total   (a)	$29,800	$54,200
Balance at the end of the year:
Accounts receivables, Net	$37,400	$57,400
Current notes receivables, net	$9,100	$7,200
Total (b)	$46,500	$64,600
Average accounts receivable   (a + b)/2	$38,150	$59,400

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Working note 4 - Computation of average inventory
	Barco	Kyan
Inventory balance at the beginning of the year (a)	55600	$107,400
Inventory balance at the end of the year (b)	$84,440	$132,500
Average inventory   (a + b)/2	$70,020	$119,950

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