34BP_b We are given the following infor... [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: 34BP_b (page 86)

We are given the following information for the Pettit Corporation.
Sales (credit)
$3,549,000
Cash
179,000
Inventory
911,000
Current liabilities
788,000
Assets turnover
1.40 times
Current ratio
2.95 times
Debt-to-assets ratio
40%
Receivables turnover
7 times
Current assets are composed of cash, marketable securities, accounts receivable, and inventory. Calculate the following balance sheet items.
b. Marketable securities.

Short Answer

Expert verified

The marketable securities of the company are $727,600.

Step by step solution

Current assets

$\begin{array}{rcl} Current asstes & = & Current liabilities 脳 Current ratio \\ = & $ 788, 000 脳 2.95 \\ = & $ 2, 324, 600 \end{array}$

Marketable securities

$\begin{array}{rcl} Marketable securities & = & Current assets - Cash - Accounts receivable - Inventory \\ = & $ 2, 324, 600 - $ 179, 000 - $ 507, 000 - $ 911, 000 \\ = & $ 727, 600 \end{array}$

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Selling and administrative expenses	$328,000
Depreciation expenses	195,000
Sales	1,660,000
Interest expenses	129,000
Cost of goods sold	560,000
Taxes	171,000

JONES CORPORATION
Current assets		Liabilities
Cash	\(20,000	Accounts payable	\)100,000
Accounts receivable	80,000	Bonds payable (long term)	80,000
Inventory	50,000
Long Term Assets		Stockholder鈥檚 Equity
Fixeed assets	\(500,000	Common Stock	\)150,000
Less: Accumulated Depreciation	(150,000)	Paid in capital	70,000
Net fixed assets*	350,000	Retained earnings	100,000
Total assets	\(500,000	Total Liab. And equity	\)500,000

JONES CORPORATION
Sales (on credit)	\(1,250,000
Cost of goods sold	750,000
Gross profit	\)500,000
Selling and administrative expenses	257,000
Less: depreciation expenses	50,000
Operating profits	\(193,000
Interest expenses	8,000
Earning before taxes	\)185,000
Tax expenses	92,500
Net income	\(92,500

SMITH CORPORATION
Current assets		Liabilities
Cash	\(35,000	Accounts payable	\)75,000
Marketable securities	7,500	Bonds payable (long term)	210,000
Accounts receivable	70,000
Inventory	75,000
Long term assets		Stockholder鈥檚 equity
Fixed assets	\(500,000	Common stock	\)75,000
Less: accumulated depreciation	250,000	Paid in capital	30,000
Net fixed assets*	250,000	Retained earnings	47,500
Total assets	\(437,500	Total liab. And equity	\)437,500

SMITH CORPORATION
Sales (on credit)	\(1,000,000
Cost of goods sold	600,000
Gross profit	\)400,000
Selling and administrative expenses	224,000
Less: depreciation expenses	50,000
Operating profits	\(126,000
Interest expenses	21,000
Earning before taxes	\)105,000
Tax expenses	52,500
Net income	\(52,500

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Short Answer

Step by step solution

Current assets

Marketable securities

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Sales (credit)	$3,549,000
Cash	179,000
Inventory	911,000
Current liabilities	788,000
Assets turnover	1.40 times
Current ratio	2.95 times
Debt-to-assets ratio	40%
Receivables turnover	7 times

January	1,300	May	1,850
February	1,150	June	2,000
March	1,100	July	1,700
April	1,600