Chapter 15: Q12SE (page 838)

Traditional Mills’s balance sheet appears as follows (amounts in thousands):
Use the following ratio data to complete Traditional Mills’s balance sheet.
Current ratio is 0.72.
2. Acid-test ratio is 0.36.

Short Answer

Expert verified

Answer

Accounts Receivables = $855, Prepaid Expense= $100, Total Current Assets= $1800, Plant Assets, Net= $2710, Long-term Note Payable =$1290, Total Liabilities=$4550, Total Liabilities and Stockholders=$7000

Step by step solution

Preparation of Balance Sheet

TRADITIONAL MILLS
Balance Sheet December 31, 2018
Assets	$	Liabilities	$
Cash	45	Total Current Liabilities	2,500
Accounts Receivables	855	Long-term Note Payable	1,290
Merchandise Inventory	800	Other Long-term Liabilities	760
Prepaid Expenses	100	Total Liabilities	4,550
Total Current Assets	1,800
Plant Assets, Net	2,710	Stockholders’ Equity
Other Assets	2,490	Stockholders’ Equity	2,450
Total Assets	7,000	Total Liabilities and Stockholders’ Equity	7,000

Step 2:Calculations

Total asset = Total liabilities and stockholder’s equity

Therefore, total liabilities and stockholder’s equity = $7,000

Total liabilities and stockholder’s equity = Total liabilities + Stockholder's equity

Total liabilities = $7,000 - $2450

= $4,550

Total liabilities = Total current liability + Long term note payable + Other long term liabilities

Long term notes payable =$4,550 - $2,500 - $760

= $1290

Current ratio = Current asset/ Current liabilities

Current assets = 0.72x2500

= $1,800

Total asset = Plant asset + Other asset + Total current asset

Plant asset = $7,000 - $1,800 - $2,490

=$2,710

Acid ratio = (Cash + Investment + Account receivable)/ Current liabilities

Account receivable = $2,500x0.36 - $45

Account receivable = $855

Prepaid expense = Total Current Assets – Inventory – Account Receivable - Cash

= $1800 - $800 - $855 - $45

= $100

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XYZ ATHLETIC SUPPLY, INC.
Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data)	2018	2017	2016	2015	2014	2016
Net sales revenue	\(275,000	\)222,000	\(199,000	\)171,000	131,000
Net Sales Revenue Increase	24%	12%	16%	31%	17%
Domestic Comparative Store Sales Increase	6%	6%	5%	8%	10%
Other Income—Net	2,090	1,780	1,770	1,700	1,310
Cost of Goods Sold	208,725	169,386	154,822	134,235	103,883
Selling and Administrative Expenses	41,280	36,340	31,670	27,450	22,540
Interest:
Interest Expense	(1,070)	(1,370)	(1,330)	(1,100)	(800)
Interest Income	140	155	150	230	140
Income Tax Expense	4,420	3,900	3,610	3,390	2,730
Net Income	21,735	12,939	9,488	6,755	2,497
Per Share of Common Stock:
Net Income	1.10	0.80	0.70	0.50	0.28
Dividends	0.45	0.43	0.39	0.35	0.31
Financial Position
Current Assets, Excluding Merchandise Inventory	\(30,900	\)27,200	\(26,800	\)24,400	$21,800
Merchandise Inventory	24,700	22,400	21,600	19,300	17,000	16,800
Property, Plant, and Equipment, Net	51,600	46,200	40,500	35,000	25,200
Total Assets	107,200	95,800	88,900	78,700	64,000
Current Liabilities	32,600	27,800	28,800	25,600	17,000
Long-term Debt	23,000	21,200	16,800	18,600	12,900
Stockholders’ Equity	51,600	46,800	43,300	35,500	34,100
Financial Ratios
Acid-Test Ratio	0.9	1.0	0.9	1.0	1.3
Rate of Return on Total Assets	22.5%	15.5%	12.8%	10.9%	9.9%
Rate of Return on Common Stockholders’ Equity	44.2%	28.7%	24.1%	19.4%	18.9%

ABC ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data)	2018	2017	2016	2015	2014	2013
Net Sales Revenue	\(250,000	\)216,000	\(191,000	\)161,000	\(134,000
Net Sales Revenue Increase	16%	13%	19%	20%	17%
Domestic Comparative Store Sales Increase	5%	6%	4%	7%	9%
Other Income—Net	2,110	1,840	1,760	1,690	1,330
Cost of Goods Sold	189,250	164,592	148,216	126,385	106,396
Selling and Administrative Expenses	41,210	36,330	31,620	27,440	22,540
Interest:
Interest Expense	(1,080)	(1,380)	(1,400)	(1,020)	(830)
Interest Income	125	165	155	235	190
Income Tax Expense	4,470	3,900	3,700	3,320	2,700
Net Income	16,225	11,803	7,979	4,760	3,054
Per Share of Common Stock:
Net Income	1.60	1.30	1.20	1.00	0.78
Dividends	0.40	0.38	0.34	0.30	0.26
Financial Position
Current Assets, Excluding Merchandise Inventory	\)30,700	\(27,200	\)26,700	\(24,400	\)21,500
Merchandise Inventory	24,500	22,600	21,700	19,000	17,500	$16,700
Property, Plant, and Equipment, Net	51,400	45,200	40,000	35,100	25,600
Total Assets	106,600	95,000	88,400	78,500	64,600
Current Liabilities	32,300	28,000	28,300	25,000	16,500
Long-term Debt	23,000	21,500	17,600	19,100	12,000
Stockholders’ Equity	51,300	45,500	42,500	34,400	36,100
Financial Ratios
Acid-Test Ratio	1.0	1.0	0.9	1.0	1.3
Rate of Return on Total Assets	17.2%	14.4%	11.2%	8.1%	7.1%
Rate of Return on Common Stockholders’ Equity	35.5%	26.%	20.8%	13.5%	13.0%

Traditional Mills’s balance sheet appears as follows (amounts in thousands):
Use the following ratio data to complete Traditional Mills’s balance sheet.
Current ratio is 0.72.
2. Acid-test ratio is 0.36.

Short Answer

Step by step solution

Preparation of Balance Sheet

Step 2:Calculations

One App. One Place for Learning.

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Traditional Mills’s balance sheet appears as follows (amounts in thousands):Use the following ratio data to complete Traditional Mills’s balance sheet.Current ratio is 0.72.2. Acid-test ratio is 0.36.

Short Answer

Step by step solution

Preparation of Balance Sheet

Step 2:Calculations

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Managerial Economics

Introduction to Business

Business Development

Organizational Behavior

Organizational Communication

Corporate Finance

Study anywhere. Anytime. Across all devices.

Traditional Mills’s balance sheet appears as follows (amounts in thousands):
Use the following ratio data to complete Traditional Mills’s balance sheet.
Current ratio is 0.72.
2. Acid-test ratio is 0.36.