I only need part B, and could you show the work involved, thankyou.
The following data were taken from the financial statements of WealConstruction Inc. for December 31, 2012 and 2011:
Dec. 31, 2012 Dec. 31, 2011 Accounts payable $112,000 $130,000 Current maturities of serial bonds payable 150,000 180,000 Serial bonds payable, 10%, issued 2005, due 2015 740,000 1,110,000 Common stock, $1 par value 70,000 80,000 Paid-in capital in excess of par 730,000 740,000 Retained earnings 2,540,000 2,020,000
The income before income tax was $222,500 and $206,400 for theyears 2012 and 2011, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
Dec. 31, 2012: Dec. 31, 2011:
b. Determine the number of times the bond interestcharges are earned during the year for both years. Round to onedecimal place.
Dec. 31, 2012: Dec. 31, 2011:
I only need part B, and could you show the work involved, thankyou.
The following data were taken from the financial statements of WealConstruction Inc. for December 31, 2012 and 2011:
| Dec. 31, 2012 | Dec. 31, 2011 | |||
| Accounts payable | $112,000 | $130,000 | ||
| Current maturities of serial bonds payable | 150,000 | 180,000 | ||
| Serial bonds payable, 10%, issued 2005, due 2015 | 740,000 | 1,110,000 | ||
| Common stock, $1 par value | 70,000 | 80,000 | ||
| Paid-in capital in excess of par | 730,000 | 740,000 | ||
| Retained earnings | 2,540,000 | 2,020,000 | ||
The income before income tax was $222,500 and $206,400 for theyears 2012 and 2011, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
| Dec. 31, 2012: | |
| Dec. 31, 2011: |
b. Determine the number of times the bond interestcharges are earned during the year for both years. Round to onedecimal place.
| Dec. 31, 2012: | |
| Dec. 31, 2011: |
Related questions
Ratio of Liabilities to Stockholders' Equity and Times InterestEarned
The following data were taken from the financial statements ofHunter Inc. for December 31 of two recent years:
| Current Year | Previous Year | |||
| Accounts payable | $522,000 | $140,000 | ||
| Current maturities of serial bonds payable | 320,000 | 320,000 | ||
| Serial bonds payable, 10% | 1,300,000 | 1,620,000 | ||
| Common stock, $1 par value | 60,000 | 70,000 | ||
| Paid-in capital in excess of par | 670,000 | 680,000 | ||
| Retained earnings | 2,330,000 | 1,850,000 | ||
The income before income tax was $469,800 and $411,100 for thecurrent and previous years, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
| Current year | |
| Previous year |
b. Determine the times interest earned ratiofor both years. Round to one decimal place.
| Current year | |
| Previous year |
c. The ratio of liabilities to stockholders'equity has improved and the times interest earnedratio has improved from the previous year. Theseresults are the combined result of a larger incomebefore income taxes and lower interest expense inthe current year compared to the previous year.
The comparative financial statements of Bettancort Inc. are as follows. The market price of Bettancort Inc. common stock was $71.25 on December 31, 2016.
| Bettancort Inc. | ||||||
| Comparative Retained Earnings Statement | ||||||
| For the Years Ended December 31, 2016 and 2015 | ||||||
| 2016 | 2015 | |||||
| Retained earnings, January 1 | $2,655,000 | $2,400,000 | ||||
| Add net income for year | 300,000 | 280,000 | ||||
| Total | $2,955,000 | $2,680,000 | ||||
| Deduct dividends: | ||||||
| On preferred stock | $15,000 | $15,000 | ||||
| On common stock | 10,000 | 10,000 | ||||
| Total | $25,000 | $25,000 | ||||
| Retained earnings, December 31 | $2,930,000 | $2,655,000 | ||||
| Bettancort Inc. | ||||
| Comparative Income Statement | ||||
| For the Years Ended December 31, 2016 and 2015 | ||||
| 2016 | 2015 | |||
| Sales (all on account) | $1,212,000 | $1,010,000 | ||
| Sales returns and allowances | 12,000 | 10,000 | ||
| Sales | $1,200,000 | $1,000,000 | ||
| Cost of goods sold | 500,000 | 475,000 | ||
| Gross profit | $700,000 | $525,000 | ||
| Selling expenses | $240,000 | $200,000 | ||
| Administrative expenses | 180,000 | 150,000 | ||
| Total operating expenses | $420,000 | $350,000 | ||
| Income from operations | $280,000 | $175,000 | ||
| Other income | 166,000 | 225,000 | ||
| $446,000 | $400,000 | |||
| Other expense (interest) | 66,000 | 60,000 | ||
| Income before income tax | $380,000 | $340,000 | ||
| Income tax expense | 80,000 | 60,000 | ||
| Net income | $300,000 | $280,000 | ||
| Bettancort Inc. | |||||||
| Comparative Balance Sheet | |||||||
| December 31, 2016 and 2015 | |||||||
| Dec. 31, 2016 | Dec. 31, 2015 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash | $450,000 | $400,000 | |||||
| Marketable securities | 300,000 | 260,000 | |||||
| Accounts receivable (net) | 130,000 | 110,000 | |||||
| Inventories | 67,000 | 58,000 | |||||
| Prepaid expenses | 153,000 | 139,000 | |||||
| Total current assets | $1,100,000 | $967,000 | |||||
| Long-term investments | 2,350,000 | 2,200,000 | |||||
| Property, plant, and equipment (net) | 1,320,000 | 1,188,000 | |||||
| Total assets | $4,770,000 | $4,355,000 | |||||
| Liabilities | |||||||
| Current liabilities | $440,000 | $400,000 | |||||
| Long-term liabilities: | |||||||
| Mortgage note payable, 8%, due 2021 | $100,000 | $0 | |||||
| Bonds payable, 5%, due 2017 | 1,000,000 | 1,000,000 | |||||
| Total long-term liabilities | $1,100,000 | $1,000,000 | |||||
| Total liabilities | $1,540,000 | $1,400,000 | |||||
| Stockholders' Equity | |||||||
| Preferred $0.75 stock, $10 par | $200,000 | $200,000 | |||||
| Common stock, $10 par | 100,000 | 100,000 | |||||
| Retained earnings | 2,930,000 | 2,655,000 | |||||
| Total stockholders' equity | $3,230,000 | $2,955,000 | |||||
| Total liabilities and stockholders' equity | $4,770,000 | $4,355,000 | |||||
Required:
Determine the following measures for 2016, rounding to one decimal place, except for dollar amounts, which should be rounded to the nearest cent. Use the rounded answer of the requirement for subsequent requirement, if required. Assume 365 days a year.
| 1. Working capital | $ | |
| 2. Current ratio | ||
| 3. Quick ratio | ||
| 4. Accounts receivable turnover | ||
| 5. Number of days' sales in receivables | days | |
| 6. Inventory turnover | ||
| 7. Number of days' sales in inventory | days | |
| 8. Ratio of fixed assets to long-term liabilities | ||
| 9. Ratio of liabilities to stockholders' equity | ||
| 10. Number of times interest charges are earned | ||
| 11. Number of times preferred dividends are earned | ||
| 12. Ratio of sales to assets | ||
| 13. Rate earned on total assets | % | |
| 14. Rate earned on stockholders' equity | % | |
| 15. Rate earned on common stockholders' equity | % | |
| 16. Earnings per share on common stock | $ | |
| 17. Price-earnings ratio | ||
| 18. Dividends per share of common stock | $ | |
| 19. Dividend yield | % |
