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Problem 13-10A Essay

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Problem 13-10
11th Edition

Complete the balance sheet and sales information in the table that follows for Hoffmeister Industries using the following financial data:
Debt Ratio: 50%
Quick ratio: 0.80x
Total assets turnover:   1.5x
Days sales outstanding: 36.5 days
Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25%
Inventory turnover ratio: 5x

Answer:

1)Debt Ratio= Total Liab/Total Asset
    50%= Total Liab/300,000
    Total Liab= 15,000,000/100
    Total Liab= 150,000

2) Total liab= Acct Payable+Lt Debt
    Acct Payable= 150,000-60,000
    Acct Payable= 90,000

3) Total Asset Turnover= Sales/Total Assets
      1.5= Sales/300,000
      Sales= 300,000x1.5
      Sales= 450,000

4) Inv Turnover= Sales/Inv
    5= 450,000/Inv
    Inv= 450,000/5
    Inv= 90,000

5) Quick ratio= (Current Asset-Inv)/Current Liab
    0.8= (CA-90,000)/90,000
    CA= 90,000+72,000
    Current Asset= 162,000

6) Profit margin on sales= (sales-COGS)/Sales
    25%= (450,000-COGS)/450,000
    11,250,000= 450,000-100.COGS
    100.COGS= 450,000-11,250,000
    100.COGS= 33,750,000
    COGS= 33,750,000/100
    Cost of Goods Solds= 337,500

7) Days sales outstanding= Acct Receivable / (sales/365)
    36.5= Acct Receivable / (450,000/365)
    36.5= A/R / 1,233
    A/R= 1,233x36.5
    Acct Receivable= 45,000

8) Current Asset= Cash+A/R+Inv
    162,000= Cash+45,000+90,000
    Cash= 27,000

9) Total Asset= Current Asset+Fixed Asset
    300,000= 162,000+FA
    Fixed Asset= 138,000

10) Total Liab and Equity= Total Liability+Common Stock+Retained Earning
      300,000= 150,000+C/S+97,500
      Common stock= 52,500

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