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Marigold Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown,...

Marigold Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Marigold and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $34,970 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,970 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Marigold’s cash flow problems are due primarily to the company’s desire to finance a $300,080 plant expansion over the next 2 fiscal years through internally generated funds.

The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.

Marigold Corporation
Balance Sheet
March 31
Assets

2021

2020

Cash

 $18,120 $12,410

Notes receivable

 147,220 132,930

Accounts receivable (net)

 130,790 124,530

Inventories (at cost)

 104,940 49,570

Plant & equipment (net of depreciation)

 1,446,500 1,416,510

    Total assets

 $1,847,570 $1,735,950
Liabilities and Owners’ Equity

Accounts payable

 $79,360 $90,220

Notes payable

 75,910 61,040

Accrued liabilities

 8,250 2,550

Common stock (130,000 shares, $10 par)

 1,296,650 1,312,800

Retained earningsa

 387,400 269,340

    Total liabilities and stockholders’ equity

 $1,847,570 $1,735,950

aCash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.


Marigold Corporation
Income Statement
For the Fiscal Years Ended March 31

2021

2020

Sales revenue

 $2,994,540 $2,716,340

Cost of goods solda

 1,536,450 1,415,660

Gross margin

 1,458,090 1,300,680

Operating expenses

 856,120 784,640

Income before income taxes

 601,970 516,040

Income taxes (40%)

 240,788 206,416

Net income

 $361,182 $309,624

aDepreciation charges on the plant and equipment of $99,960 and $101,650 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.

(a)

Compute the following items for Marigold Corporation. (Round answers to 2 decimal places, e.g. 2.25 or 2.25%.)

1. Current ratio for fiscal years 2020 and 2021.
2. Acid-test (quick) ratio for fiscal years 2020 and 2021.
3. Inventory turnover for fiscal year 2021.
4. Return on assets for fiscal years 2020 and 2021. (Assume total assets were $1,705,230 at 3/31/19.)
5. Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2020 to 2021.

2020

2021
1.

Current ratio

enter the ratio rounded to 2 decimal places

 :1

enter the ratio rounded to 2 decimal places

 :1
2.

Acid-test (quick) ratio

enter the ratio rounded to 2 decimal places

 :1

enter the ratio rounded to 2 decimal places

 :1
3.

Inventory turnover

enter the inventory turnover rounded to 2 decimal places

 times
4.

Return on assets

enter the return on assets in percentages rounded to 2 decimal places

 %

enter the return on assets in percentages rounded to 2 decimal places

 %
5.

Percent Changes

Percent Increase

Sales revenue

enter percentages rounded to 2 decimal places

 %

Cost of goods sold

enter percentages rounded to 2 decimal places

 %

Gross margin

enter percentages rounded to 2 decimal places

 %

Net income after taxes

enter percentages rounded to 2 decimal places

 %
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Homework Answers

Answer #1

COMPUTE THE FOLLOWING ITEM FROM MARIGOLD CORPORATION -

CURRENT RATIO FOR THE FISCAL YEAR 2020 AND 2021

CURRENT RATIO =CURRENT ASSET /CURRENT LIABILITY

2020= 319,440/153810=2.07

2021=401,070/163520=2.45

QUICK RATIO=CURRENT ASSET-INVENTORY/CURRENT LIABILITY

2020=269870/153810=1.74

2021=296130/163520=1.81

INVENTORY TURNOVER=COST OF GOODS SOLD/AVERAGE INVENTORIES

2021=1536450/77345=19.86%

RETURN ON ASSET=NET INCOME / AVERAGE TOTAL ASSET

2020=309624/1720590=0.17

2021=240788/1791760=0.13

PERCENTAGE CHANGE=NEW YEAR -OLD YEAR/OLD YEAR

SALES =2994540-2716340/2716340=10.24%

COST OF GOOD SOLD=1536450-1415660/1415660=8.53%

GR0SS MARGIN=1458090-1300680/1300680=12.10%

NET INCOME=361182-309624/309624=16.65%

NOTES -

CURRENT ASSET=CASH+INVENTORIES+NOTE RECEIVABLE+ACCOUNT RECIVABLE

CURRENT LIABILITY=ACCOUNT PAYABLE +NOTE PAYABLE+ACCRUED LIABILITY

AVERAGE INVENTORIES=OP BEGINNING +CLOSING/2

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