Question

2.2 Following is the balance sheet of Solomon Company for 2018: SOLOMON COMPANY Balance sheet Assets...

2.2 Following is the balance sheet of Solomon Company for 2018:

SOLOMON COMPANY
Balance sheet
Assets
Cash $ 14,600
Marketable securities 8,420
Accounts receivable 12,800
Inventory 10,800
Property and equipment 172,000
Accumulated depreciation (12,400 )
Total assets $ 206,220
Liabilities and Stockholders’ Equity
Accounts payable $ 8,270
Current notes payable 3,760
Mortgage payable 4,350
Bonds payable 21,660
Common stock 114,600
Retained earnings 53,580
Total liabilities and stockholders’ equity $ 206,220

The average number of common stock shares outstanding during 2018 was 880 shares. Net income for the year was $14,300.

Required

Compute each of the following: (Round your answers to 2 decimal places.)

a.Current ratio

b.Earnings per share per share

c.Quick (acid-test) ratio

d.Return on investment %

e.Return on equity %

f.Debt to equity ratio %

Business   Accounting   
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Answer #1

a. current ratio = current assets / current liabilities

= (14600+8420+12800+10800) / (8270+3760) =3.88 times

b. Earning per share = Net income / No. Of common stock

= 14300 / 880 = 16.25 per share

c. Quick ratio = quick assets / current liabilities

= (14600+8420+12800) / (8270+3760) = 2.98 times

d. Return on investment = net income / total assets

= 14300/206220 = 6.93%

e. Return on equity = net income / shareholders equity

= 14300 / (114600+53580) = 8.50%

f. Debt to equity ratio =debt / equity

= (4350+21660) / (114600+53580) = 15.47%

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