The financial statements for Castile Products, Inc., are given below:
|Castile Products, Inc.
|Accounts receivable, net||170,000|
|Total current assets||555,000|
|Property and equipment, net||850,000|
|Liabilities and Stockholders' Equity|
|Bonds payable, 10%||390,000|
|Common stock, $5 per value||$||180,000|
|Total stockholders’ equity||765,000|
|Total liabilities and stockholders’ equity||$||1,405,000|
|Castile Products, Inc.
For the Year Ended December 31
|Cost of goods sold||1,408,000|
|Selling and administrative expenses||630,000|
|Net operating income||1,277,000|
|Net income before taxes||1,238,000|
|Income taxes (30%)||371,400|
Account balances at the beginning of the year were: accounts receivable, $220,000; and inventory, $290,000. All sales were on account.
Compute the following financial data and ratios:
1. Working capital.
2. Current ratio. (Round your answer to 1 decimal place.)
3. Acid-test ratio. (Round your answer to 2 decimal places.)
4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
5. Times interest earned ratio. (Round your answer to 2 decimal places.)
6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)
Castile Products Inc.
|Sl no||Formula||Calculations ($)|
|1||Working capital||current assets - current liabilities||555,000 - 250,000||$ 305,000|
|2||Current ratio||current assets/ current liabilities||555,000/250,000||2.2 : 1|
|3||Acid test ratio||(cash + accounts receivable)/ current liabilities||(23,000+170,000)/250,000||0.77 : 1|
|4||Debt to Equity||total liabilities/ total equity||640,000/765,000||83.66 %|
|5||Time interest earned ratio||operating income/ interest||12,77,000/39,000||32.74 times|
|6||Average collection period||365/sales × average accounts receivable||365/33,15,000 × (170,000+220,000)/2||21.5 days|
|7||Average sale period||365/cost sales of × average inventory||365/14,08,000 × (350,000+290,000)/2||83 days|
|8||Operating cycle||average sales period + average collection period||83 days + 21.5 days||104.5 days|
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