Question

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Income statements and balance sheets data for Virtual Gaming Systems are provided below.

VIRTUAL GAMING SYSTEMS
Income Statements
For the years ended December 31
	2022				2021
Net sales	$	3,555,000			$	3,081,000
Cost of goods sold		2,489,000				1,959,000
Gross profit		1,066,000				1,122,000
Expenses:
Operating expenses		964,000				867,000
Depreciation expense		39,000				31,500
Loss on sale of land		0				8,900
Interest expense		22,500				19,500
Income tax expense		8,900				52,500
Total expenses		1,034,400				979,400
Net income	$	31,600			$	142,600

VIRTUAL GAMING SYSTEMS
Balance Sheets
December 31
	2022				2021				2020
Assets
Current assets:
Cash	$	214,500			$	195,000			$	153,000
Accounts receivable		88,500				90,000				69,000
Inventory		138,500				114,000				144,000
Prepaid rent		14,900				12,900				7,080
Long-term assets:
Investment in bonds		114,000				114,000				0
Land		309,000				219,000				249,000
Equipment		309,000				279,000				219,000
Less: Accumulated depreciation		(121,500	)			(82,500	)			(51,000	)
Total assets	$	1,066,900			$	941,400			$	790,080
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	118,200			$	75,000			$	134,780
Interest payable		11,700				7,800				3,900
Income tax payable		12,900				19,500				14,900
Long-term liabilities:
Notes payable		490,000				294,000				234,000
Stockholders' equity:
Common stock		309,000				309,000				309,000
Retained earnings		125,100				236,100				93,500
Total liabilities and stockholders’ equity	$	1,066,900			$	941,400			$	790,080

2. Calculate the following profitability ratios for 2021 and 2022: (Round your answers to 1 decimal place.)

Gross profit ratio 2021 2022

return on asset

Profit margin

Asset turnover times times

Answer 1

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