Question

Diamond Company Statement of Comprehensive Income for the year ended December 31, 2019 Sales revenue Cost...

Diamond Company

Statement of Comprehensive Income

for the year ended December 31, 2019

Sales revenue

Cost of goods sold

Gross profit

$1,294,000

737,000

$557,000

Operating Expenses

Advertising expense

$ 7,900

Depreciation expense

Salaries expense

64,000

169,000

240,900

Profit

$316,100

Diamond Company

Statement of Financial Position

December 31, 2019

Assets

Current Assets

Cash

$ 37,000

Accounts receivable

Inventory

Total current assets

115,000

106,500

$258,500

Non-current Assets

Property, Plant, & Equipment

$565,000

Less: Accumulated depreciation

115,000

450,000

Total Assets

$708,500

Liabilities

Current Liabilities

Accounts payable

$177,000

Total current liabilities

$177,000

Non-current Liabilities

Bank loan (payable in 3 years)

254,000

Total liabilities

$431,000

Shareholders’ Equity

Common shares

$245,000

Retained earnings

32,500

Total equity

277,500

Total Liabilities and Shareholders’ Equity

$708,500

Using Diamond Company’s financial statements, calculate the following ratios to one (1) decimal place, and answer the questions that follow:

1a)

i) working capital

ii) current ratio

iii) quick ratio or acid test

iv) Explain what the current and acid test ratios you calculated above communicate with respect to the company’s ability to repay its short-term debts. (1 mark)


(b) Days’ sales outstanding

2a) Calculate gross profit (or gross margin) ratio.

b) If the acceptable industry average for gross profit is 40%, explain how the company is doing relative to the industry standard. (1 mark)

c) Identify and explain two (2) ways in which the company could improve its gross profit (or gross margin) ratio.

d) Calculate inventory turnover.

e) Calculate the number of days it takes Diamond Company to sell its inventory.

3) Assume Diamond Company’s credit policy for its customers is 35 days. Using the ratios calculated above and any other ratios you deem necessary, comment on Diamond Company’s liquidity at December 31, 2019.

4. a) Identify and provide an example for each of the four (4) elements of a management control system present in the following example: (4 marks – ½ mark per element; ½ mark per explanation)

The Chocolate Dream Company makes chocolate bars in its factory every day. To pass quality control, each chocolate bar must weigh between 200 and 210 grams. A scale is used to weigh each chocolate bar that the company produces. Any chocolate bars that are over or under this standard are taken off the production line. Management receives a report of the number of chocolate bars rejected on a weekly basis. Line managers are notified if rejects are greater than 5% of total weekly production and make the necessary changes to the production process.

b) Chocolate Dream Company is looking to improve its gross profit. Using a balanced scorecard, identify and provide a specific example of two (2) perspectives that the company could examine.

Homework Answers

Answer #1
working capital current assets – current liabilities
2019 ($)
current assets 258500
current liabilities 177000
working capital 81500
current ratio current assets / current liabilities
2019 ($)
current assets 258500
current liabilities 177000
current ratio 1.5
quick ratio (Cash + accounts receivable) / current liabilities
2019 ($)
cash 37000
accounts receivable 115000
acid assets 152000
current liabilities 177000
quick ratio 0.9

the current ratio and quick ratio indicates that the company if financially sound and can repay their debt.

days sales outstanding accounts receivable / sales * 365 days
2019 ($)
accounts receivable 115000
sales 1294000
days sales outstanding 32.4
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2019 and 2020 2020 2019 Gross...
LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2019 and 2020 2020 2019 Gross sales $ 19,800 $ 15,600 Sales returns and allowances 900 100 Net sales $ 18,900 $ 15,500 Cost of merchandise (goods) sold 11,800 8,800 Gross profit $ 7,100 $ 6,700 Operating expenses: Depreciation $ 780 $ 640 Selling and administrative 2,800 2,400 Research 630 540 Miscellaneous 440 340 Total operating expenses $ 4,650 $ 3,920 Income before interest and taxes $ 2,450 $ 2,780...
Fictishus Inc. Balance Sheet As of December 31, 2019 ASSETS                                &nb
Fictishus Inc. Balance Sheet As of December 31, 2019 ASSETS                                                                                                                LIABILITIES AND SHAREHOLDERS EQUITY Current Assets                                                                                                 Current Liabilities                                     Cash                                                                  600                                           Accounts Payable                                        800                   Accounts Receivable                                  400                                           Notes Payable                                              200                   Inventory                                                     1,400                                           Total Current Liabilities                         1,000                   Investments                                               1,200                         Long Term Debt                                                          2,800                   Total Current Assets                               3,600                         TOTAL LIABILITIES                                                      3,800 Fixed Assets                                                                 2,200 TOTAL ASSETS                                                             5,800                         Shareholders Equity                                                                                                                                                 Common Stock                                         2,000 Select 2019 Income Statement information: Revenue:                                            $8,100 Cost of Goods Sold:     ...
Income Statement For the year ended December​ 31, 2019 Sales Revenue ​$347,000 Cost of Goods Sold...
Income Statement For the year ended December​ 31, 2019 Sales Revenue ​$347,000 Cost of Goods Sold ​(78,000) Gross Profit ​$269,000 Selling and Administrative Expenses ​(43,900) Operating Income ​225,100 Gain on Sale of Equipment ​5,500 Net Income ​$230,600 All of the​ company’s sales are made on account. At the beginning of the​ year, the Accounts Receivable balance was​ $53,500. The balance had decreased to​ $50,200 by​ year-end. All of the​ company’s inventory purchases are made on account. Accounts Payable consists solely...
GREAT ADVENTURES, INC. Income Statement For the Year Ended December 31, 2020   Revenues:      Service revenue (clinic,...
GREAT ADVENTURES, INC. Income Statement For the Year Ended December 31, 2020   Revenues:      Service revenue (clinic, racing, TEAM) $535,000      Sales revenue (MU watches) 110,000         Total revenues $645,000   Expenses:      Cost of goods sold (MU watches) 66,000      Operating expenses 303,876      Depreciation expense 46,000      Interest expense 29,324      Income tax expense 54,600                  Total expenses 499,800   Net income $145,200 Assets   Current assets:      Cash $ 298,404 $ 134,000    164,404    (I)      Accounts receivable 39,000 31,000    8,000    (I)      Inventory 16,400 13,600    2,800...
Extracts of the Statement of Comprehensive Income for the year ended 31 December 2018 and the...
Extracts of the Statement of Comprehensive Income for the year ended 31 December 2018 and the Statement of Financial Position as at 31 December 2018 are given below for two companies viz. ABC Limited and XYZ Extract of the Statement of Comprehensive Income for the year ended 31 December 2018: ABC Limited               R XYZ Limited            R Sales          6 600 000      2 160 000 Cost of Sales          4 620 000         864 000 Gross profit         ...
The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands) Cash $ 277,000...
The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands) Cash $ 277,000 Accounts Payable $ 169,000 Receivables 220,000 Notes Payable 74,000 Inventories 145,000 Other current liabilities 57,000 Total current assets $ 642,000 Total current liabilities $ 300,000 Net fixed assets 305,000 Long-term debt 66,500 Common equity 581,000 Total assets $ 947,500 Total liabilities & equity $ 947,500 The Ferri Furniture Company: Income Statement for Year Ended December 31, 2016 (In Thousands) Sales $ 3,231,000 Cost of...
LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2016 and 2017 2017 2016 Gross...
LOGIC COMPANY Comparative Income Statement For Years Ended December 31, 2016 and 2017 2017 2016 Gross sales $ 19,000 $ 15,000 Sales returns and allowances 1,000 100 Net sales $ 18,000 $ 14,900 Cost of merchandise (goods) sold 12,000 9,000 Gross profit $ 6,000 $ 5,900 Operating expenses: Depreciation $ 700 $ 600 Selling and administrative 2,200 2,000 Research 550 500 Miscellaneous 360 300 Total operating expenses $ 3,810 $ 3,400 Income before interest and taxes $ 2,190 $ 2,500...
Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1    20Y2    20Y1 Sales $...
Comparative Income Statement For the Years Ended December 31, 20Y2 and 20Y1    20Y2    20Y1 Sales $ 2,579,820 $ 2,376,910 Cost of goods sold 950,460 874,420 Gross profit $ 1,629,360 $ 1,502,490 Selling expenses $ 558,100 $ 695,720 Administrative expenses 475,420 408,590 Total operating expenses 1,033,520 1,104,310 Income from operations $ 595,840 $ 398,180 Other income 31,360 25,420 $ 627,200 $ 423,600 Other expense (interest) 184,000 101,600 Income before income tax $ 443,200 $ 322,000 Income tax expense 53,200 38,300 Net...
Income statement and balance sheet data for The Sports Shack are provided below. The Sports Shack...
Income statement and balance sheet data for The Sports Shack are provided below. The Sports Shack Income Statements For the years ended December 31 2019 2018 Sales revenue $8,200,000 $6,600,000 Cost of goods sold 6,100,000 4,700,000 Gross profit 2,100,000 1,900,000        Expenses:            Operating expenses 1,450,000 1,400,000            Depreciation expense 90,000 100,000            Interest expense 25,000 50,000            Income tax expense 95,000 80,000                Total expenses 1,660,000 1,630,000 Net income $440,000 $270,000 The Sports Shack Balance Sheets December 31 Assets 2019 2018 2017 Current assets:         Cash...
Business Consulting company Income Statement For the Year Ended December 31, 2017 Revenue: Consulting revenue earned...
Business Consulting company Income Statement For the Year Ended December 31, 2017 Revenue: Consulting revenue earned $98,000 Expenses: Cost of goods sold $46,500 Rent expense $3,700 Salary expense (by production) $5,500 Equipment expense $2,000 Utilities (by production) $4,600 Income before income tax _________ Income Tax expense 17,400 Net Income _________ Check the Income statement of the consulting company and calculate the following: Net Income: Gross Profit (Revenue-Cost of good sold): Please split the expenses (list the items and then calculate...