Presented here are the comparative balance sheets of Hames,Inc., at December 31, 2017 and 2016. Sales for the year endedDecember 31, 2017, totaled $640,000.
HAMES, INC.,
Balance Sheets
December 31, 2017 and 2016 2017 2016 Assets Cash $ 19,000 $ 20,000 Accounts receivable 78,000 72,000 Merchandise inventory 103,000 99,000 Total current assets $ 200,000 $ 191,000 Land 50,000 40,000 Plant and equipment 125,000 110,000 Less: Accumulateddepreciation (65,000 ) (60,000 ) Total assets $ 310,000 $ 281,000 Liabilities Short-term debt $ 18,000 $ 17,000 Accounts payable 64,000 75,500 Other accrued liabilities 20,000 18,000 Total current liabilities $ 102,000 $ 110,500 Long-term debt 22,000 30,000 Total liabilities $ 124,000 $ 140,500 StockholdersâEquity Common stock, no par, 100,000shares authorized
40,000 and 25,000 shares issued, respectively $ 74,000 $ 59,000 Retained earnings: Beginning balance $ 81,500 $ 85,000 Net income for the year 50,500 1,500 Dividends for the year (20,000 ) (5,000 ) Ending balance $ 112,000 $ 81,500 Total stockholdersâ equity $ 186,000 $ 140,500 Total liabilities andstockholdersâ equity $ 310,000 $ 281,000
a. Calculate ROI for 2017. (Do notround intermediate calculations. Round your final answer to 2decimal places.)
b. Calculate ROE for 2017. (Round youranswer to 1 decimal place.)
c. Calculate working capital at December 31,2017.
d. Calculate the current ratio at December 31,2017. (Round your answer to 2 decimal places.)
e. Calculate the acid-test ratio at December31, 2017. (Round your answer to 2 decimalplaces.)
f. Assume that on December 31, 2017, thetreasurer of Hames, Inc., decided to pay $15,000 of accountspayable. What impact, if any, this receipt will have on the answersyou calculated for requirements a-d (increase,decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c.Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
g. Assume that instead of paying $15,000 ofaccounts payable on December 31, 2017. Hames, Inc., collected$15,000 of accounts receivable. What impact, if any, this receiptwill have on the answers you calculated for requirementsa-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c. Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
Presented here are the comparative balance sheets of Hames,Inc., at December 31, 2017 and 2016. Sales for the year endedDecember 31, 2017, totaled $640,000.
| HAMES, INC., Balance Sheets December 31, 2017 and 2016 | ||||||||||
| 2017 | 2016 | |||||||||
| Assets | ||||||||||
| Cash | $ | 19,000 | $ | 20,000 | ||||||
| Accounts receivable | 78,000 | 72,000 | ||||||||
| Merchandise inventory | 103,000 | 99,000 | ||||||||
| Total current assets | $ | 200,000 | $ | 191,000 | ||||||
| Land | 50,000 | 40,000 | ||||||||
| Plant and equipment | 125,000 | 110,000 | ||||||||
| Less: Accumulateddepreciation | (65,000 | ) | (60,000 | ) | ||||||
| Total assets | $ | 310,000 | $ | 281,000 | ||||||
| Liabilities | ||||||||||
| Short-term debt | $ | 18,000 | $ | 17,000 | ||||||
| Accounts payable | 64,000 | 75,500 | ||||||||
| Other accrued liabilities | 20,000 | 18,000 | ||||||||
| Total current liabilities | $ | 102,000 | $ | 110,500 | ||||||
| Long-term debt | 22,000 | 30,000 | ||||||||
| Total liabilities | $ | 124,000 | $ | 140,500 | ||||||
| StockholdersâEquity | ||||||||||
| Common stock, no par, 100,000shares authorized 40,000 and 25,000 shares issued, respectively | $ | 74,000 | $ | 59,000 | ||||||
| Retained earnings: | ||||||||||
| Beginning balance | $ | 81,500 | $ | 85,000 | ||||||
| Net income for the year | 50,500 | 1,500 | ||||||||
| Dividends for the year | (20,000 | ) | (5,000 | ) | ||||||
| Ending balance | $ | 112,000 | $ | 81,500 | ||||||
| Total stockholdersâ equity | $ | 186,000 | $ | 140,500 | ||||||
| Total liabilities andstockholdersâ equity | $ | 310,000 | $ | 281,000 | ||||||
a. Calculate ROI for 2017. (Do notround intermediate calculations. Round your final answer to 2decimal places.)
b. Calculate ROE for 2017. (Round youranswer to 1 decimal place.)
c. Calculate working capital at December 31,2017.
d. Calculate the current ratio at December 31,2017. (Round your answer to 2 decimal places.)
e. Calculate the acid-test ratio at December31, 2017. (Round your answer to 2 decimalplaces.)
f. Assume that on December 31, 2017, thetreasurer of Hames, Inc., decided to pay $15,000 of accountspayable. What impact, if any, this receipt will have on the answersyou calculated for requirements a-d (increase,decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c.Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
g. Assume that instead of paying $15,000 ofaccounts payable on December 31, 2017. Hames, Inc., collected$15,000 of accounts receivable. What impact, if any, this receiptwill have on the answers you calculated for requirementsa-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c. Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
Related questions
Complete P9-3 using the template provided here.
| P9-3 Performratio analysis, and discuss change in financial position andoperating results | |||||||||
| Condensed balance sheet andincome statement data for Jergan Corporation are presentedhere. | |||||||||
| JERGAN CORPORATION | |||||||||
| Balance Sheet | |||||||||
| December 31 | |||||||||
| 2017 | 2016 | 2015 | |||||||
| Cash | $30,000 | $20,000 | $18,000 | ||||||
| Accounts receivable (net) | 50,000 | 45,000 | 48,000 | ||||||
| Other current assets | 90,000 | 95,000 | 64,000 | ||||||
| Investments | 55,000 | 70,000 | 45,000 | ||||||
| Plant and equipment (net) | 500,000 | 370,000 | 358,000 | ||||||
| $725,000 | $600,000 | $533,000 | |||||||
| Current liabilities | $85,000 | $80,000 | $70,000 | ||||||
| Long-term debt | 145,000 | 85,000 | 50,000 | ||||||
| Common stock, $10 par | 320,000 | 310,000 | 300,000 | ||||||
| Retained Earnings | 175,000 | 125,000 | 113,000 | ||||||
| $725,000 | $600,000 | $533,000 | |||||||
| JERGAN CORPORATION | |||||||||
| Income Statement | |||||||||
| For the Year Ended December31 | |||||||||
| 2017 | 2016 | ||||||||
| Sales revenue | $740,000 | $600,000 | |||||||
| Less: Sales return and allowances | 40,000 | 30,000 | |||||||
| Net sales | 700,000 | 570,000 | |||||||
| Cost of goods sold | 425,000 | 350,000 | |||||||
| Gross profit | 275,000 | 220,000 | |||||||
| Operating expenses (including income taxes) | 180,000 | 150,000 | |||||||
| Net income | 95,000 | 70,000 | |||||||
| Additional information: | |||||||||
| 1. | The market price of Jergan's common stock was$7.00, $7.50, and $8.50 for 2015, | ||||||||
| 2016, and 2017, respectively. | |||||||||
| 2. | You must compute dividends paid. All dividends werepaid in cash. | ||||||||
| Instructions | |||||||||
| (a) | Compute the following ratios for 2016 and2017. | ||||||||
| (1) Profit margin. | 5. Price-earnings ratio. | ||||||||
| (2) Gross profit rate. | 6. Payout ratio. | ||||||||
| (3) Asset turnover. | 7. Debt to assets ratio. | ||||||||
| (4) Earnings per share. | |||||||||
| (b) | Based on the ratios calculated, discuss briefly theimprovement or lack thereof in the | ||||||||
| financial position and operating results from 2016to 2017 of Jergan Corporation. | |||||||||
| NOTE: Enter a numberin cells requesting a value; enter either a number or a formula incells with a "?" . | |||||||||
| (a)(1) | Profit margin | ||||||||
| 2017 | 2016 | ||||||||
| Net income | Value | Value | |||||||
| Net sales | Value | Value | |||||||
| Profit margin | ? | ? | |||||||
| (a)(2) | Gross profit rate | ||||||||
| 2017 | 2016 | ||||||||
| Gross profit | Value | Value | |||||||
| Net sales | Value | Value | |||||||
| Gross profit rate | ? | ? | |||||||
| (a)(3) | Asset turnover | ||||||||
| 2017 | 2016 | ||||||||
| Total assets, 2017 | Value | ||||||||
| Total assets, 2016 | Value | Value | |||||||
| Total assets, 2015 | Value | ||||||||
| Average total assets | ? | ? | |||||||
| 2017 | 2016 | ||||||||
| Net sales | Value | Value | |||||||
| Average total assets | Value | Value | |||||||
| Asset turnover | ? | ? | |||||||
| (a)(4) | Earnings per share | ||||||||
| 2017 | 2016 | ||||||||
| Common shares outstanding, 2017 | Value | ||||||||
| Common shares outstanding, 2016 | Value | Value | |||||||
| Common shares outstanding, 2015 | Value | ||||||||
| Average common shares outstanding | ? | ? | |||||||
| 2017 | 2016 | ||||||||
| Net income - Pfd. Dividends | Value | Value | |||||||
| Average common shares outstanding | Value | Value | |||||||
| Earnings per share | ? | ? | |||||||
| (a)(5) | Price-earnings ratio | ||||||||
| 2017 | 2016 | ||||||||
| Stock price per share | Value | Value | |||||||
| Earnings per share | Value | Value | |||||||
| Price-earnings ratio | ? | ? | |||||||
| (a)(6) | Payout ratio | ||||||||
| 2017 | 2016 | ||||||||
| Prior year's retained earnings | Value | Value | |||||||
| Plus: current year net income | Value | Value | |||||||
| Less: current year's retained earnings | Value | Value | |||||||
| Cash dividends declared | ? | ? | |||||||
| 2017 | 2016 | ||||||||
| Cash dividends declared (common) | Value | Value | |||||||
| Net income | Value | Value | |||||||
| Payout ratio | ? | ? | |||||||
| (a)(7) | Debt to assets ratio | ||||||||
| 2017 | 2016 | ||||||||
| Current Liabilities | Value | Value | |||||||
| Long-term debt | Value | Value | |||||||
| Total liabilities | ? | ? | |||||||
| Total assets | Value | Value | |||||||
| Debt to assets ratio | ? | ? | |||||||
| After you have completed P9-3,consider the additional question. | |||||||||
| 1. | Assume that 2017 net income and total assetschanged to $87,000 and total assets to | ||||||||
| $700,000. Show the impact of these changes on theratios. | |||||||||
Income statements and balance sheets data for Virtual GamingSystems are provided below.
| VIRTUAL GAMING SYSTEMS Income Statements For the year ended December 31 | ||
| 2019 | 2018 | |
| Net sales | $3,500,000 | $3,026,000 |
| Cost of goodssold | 2,478,000 | 1,948,000 |
| Gross profit | 1,022,000 | 1,078,000 |
| Expenses: | ||
| Operating expenses | 953,000 | 856,000 |
| Depreciation expense | 28,000 | 26,000 |
| Loss on sale of land | 0 | 7,800 |
| Interest expense | 17,000 | 14,000 |
| Income tax expense | 7,800 | 47,000 |
| Total expenses | 1,005,800 | 950,800 |
| Net income | $ 16,200 | $ 127,200 |
| VIRTUAL GAMING SYSTEMS Balance Sheets December 31 | |||
| 2019 | 2018 | 2017 | |
| Assets | |||
| Current assets: | |||
| Cash | $ 200,000 | $184,000 | $142,000 |
| Accounts receivable | 74,000 | 79,000 | 58,000 |
| Inventory | 124,000 | 103,000 | 133,000 |
| Prepaid rent | 13,800 | 11,800 | 5,760 |
| Long-termassets: | |||
| Investment inbonds | 103,000 | 103,000 | 0 |
| Land | 298,000 | 208,000 | 238,000 |
| Equipment | 298,000 | 268,000 | 208,000 |
| Less: Accumulateddepreciation | (94,000) | (66,000) | (40,000) |
| Totalassets | $1,016,800 | $890,800 | $744,760 |
| Liabilitiesand Stockholders' Equity | |||
| Currentliabilities: | |||
| Accounts payable | $ 203,400 | $ 64,000 | $108,160 |
| Interest payable | 8,400 | 5,600 | 2,800 |
| Income tax payable | 11,800 | 14,000 | 13,800 |
| Long-term liabilities: | |||
| Notes payable | 380,000 | 283,000 | 223,000 |
| Stockholders'equity: | |||
| Common stock | 298,000 | 298,000 | 298,000 |
| Retained earnings | 115,200 | 226,200 | 99,000 |
| Totalliabilities and stockholdersâ equity | $1,016,800 | $890,800 | $744,760 |
Questions:
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