22BP_a The balance sheet for Stud Cloth... [FREE SOLUTION]

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Foundations Of Financial Management

Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen

Business Studies

16th Edition 路 768 pages

ISBN: 9781259277160

Chapter 2: 22BP_a (page 82)

The balance sheet for Stud Clothiers is shown below. Sales for the year were $2,400,000, with 90 percent of sales sold on credit.
Stud Clothier
Balance sheet 20X1
Assets
Liabilities and Equity
Cash
$60,000
Account payable
$220,000
Account receivable
240,000
Accrued taxes
30,000
Inventory
350,000
Bonds payable (long term)
150,000
Plant and equipment
410,000
Common stock
80,000
Paid in capital
200,000
Retained earnings
380,000
Total assets
$1,060,000
Total LIbilities and Equity
$1,060,000
Compute the following:
a. Current ratio

Short Answer

Expert verified

Current ratio of the stud clothier company is 2.6.

Step by step solution

Current assets

$\begin{array}{rcl} Current assets & = & Cash + Accounts receivable + Inventory \\ = & $ 60, 000 + $ 240, 000 + $ 350, 000 \\ = & $ 650, 000 \end{array}$

Current liabilities

$\begin{array}{rcl} Current liabilities & = & Accounts payable + Accrued taxes \\ = & $ 220, 000 + $ 30, 000 \\ = & $ 250, 000 \end{array}$

Calculation of current ratio

$\begin{array}{rcl} Current ratio & = & \frac{Current assets}{Current liabilities} \\ = & \frac{$ 650, 000}{$ 250, 000} \\ = & 2.6 \end{array}$

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Material	\(15.00 per unit
Labor	8.00 per unit
Overhead	7.10 per unit

Material	\)17.50 per unit
Labor	8.80 per unit
Overhead	10.30 per unit

Sales	\( 2790000
Cost of goods sold	1790000
Gross profits	\) 1000000
Selling and administrative expenses	302000
Operating profits	\( 698000
Interest Expense	54800
Income before tax	\) 643200
Taxes 30%	192960
Income after tax	$ 450240

Year	Net Income	Total assets	Stockholder鈥檚 Equity	Total debts
20X1	\(155,000	\)2,390,000	\(761,000	\)1,629,000
20X2	191,000	2,700,000	966,000	1,734,000
20X3	208,000	2,730,000	1,770,000	960,000
20X4	192,000	2,470,000	2,220,000	250,000

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Short Answer

Step by step solution

Current assets

Current liabilities

Calculation of current ratio

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Stud Clothier
Balance sheet 20X1
Assets		Liabilities and Equity
Cash	\)60,000	Account payable	\(220,000
Account receivable	240,000	Accrued taxes	30,000
Inventory	350,000	Bonds payable (long term)	150,000
Plant and equipment	410,000	Common stock	80,000
		Paid in capital	200,000
		Retained earnings	380,000
Total assets	\)1,060,000	Total LIbilities and Equity	$1,060,000