PROBLEM 1.

ABC COMPANY

Comparative Balance Sheet

December 31

ASSETS 2020 2019 Difference Percent

Current Assets 360 300 60 20%
Plant Assets 640 500 140 28%
Total Assets 1,000 800 200 25%
Liabilities and
Stockholder’s
Equity
Current Liabilities 150 120 30 25%
Long Term Debt 240 160 80 50%
Common Stock 350 280 70 25%
Retained Earnings 260 240 20 8%
Total Liabilities 1,000 800 200 25%
and
Shareholder’s
Equity
PROBLEM 1.B

ABC COMPANY

Comparative Balance Sheet

December 31

ASSETS 2020 Percent 2019 Percent

Current Assets 360 36% 60 37.5%
Plant Assets 640 64% 140 62.5%
Total Assets 1,000 100% 200 100%
Liabilities and
Stockholder’s
Equity
Current Liabilities 150 15% 30 15%
Long Term Debt 240 24% 80 20%
Common Stock 350 35% 70 35%
Retained Earnings 260 26% 20 30%
Total Liabilities 1,000 100% 200 100%
and
Shareholder’s
Equity
a. Gross Margin Percentage= Gross Margin/Sales
430,000/1,130,000= 38.05
b. Working Capital= Current Assets- Current Liabilities
620,000-250,000= 370,000
c. Current Ratio= Current Assets/ Current Liabilities
620,000/250,000= 2.48
d. Acid-test Ration= Quick Assets/ Current Liabilities
620,000-140,000/250,000= 1.92
e. Account Receivable Turnover= Sales on Account/ Average Account Receivable
190,000+200,000/2= 195,000
1,130,000//195,000= 5.79
f. Average Collection Period= 365 days/ Account Receivable Turnover
365/ 5.79= 63.04
g. Inventory Turnover= Cost of Goods sold/ Average Inventory
700,000/140,000= 5
h. Average Sale Period= 365 days/ Inventory Turnover
365/ 5= 73
i. Times Interest Earned= Net Operating Income/ Interest Expense
186,000/29,000= 6.41
j. Debt-to-equity Ratio= Liabilities/ Stockholder’s Equity
470,000/930,000= 0.505