Question

Category	Prior Year	Current Year
Accounts Payable	41400	45000
Accounts Receivable	115200	122400
Accruals	16200	13500
Additional Paid-in Capital	200000	216660
Cash	???	???
Common Stock @ par value	37600	42000
COGS	131400	172056
Depreciation expense	21600	22097
Interest Expense	16200	16721
Inventories	111600	115200
Long-term debt	135000	137240
Net Fixed assets	376767	399600
Notes Payable	59400	64800
Operating Expenses (excl. depr.)	50400	68673
Retained Earnings	122400	136800
Sales	255600	338511
Taxes	9900	18710

Find: (please include all steps)

1. The current year's cash balance

2. The current year's Return on Assets (ROA)

3. The current year's Return on Equity (ROE)

4. The current year's entry for long-term debt on a common-size balance sheet

Answer 1

1. Cash balance can be calculated from the balance sheet.

So we prepare a balance sheet by the info given

Balance sheet
Asset	Prior Year	Current Year	Liability	Prior Year	Current Year
Inventory	111,600	115,200	account Payables	41,400	45,000
Receivables	115,200	122,400	Notes payable	59,400	64,800
Cash	??	??	Accruals	16200	13500
Total current asset	235,233	256,400	Total current liability	117,000	123,300
Net fixed asset	376,767	399,600	Long term debt	135,000	137,240
			Common Stock @ par value	37,600	42,000
			Additional paid in capital	200,000	216,660
			Retained earnings	122,400	136,800
Total asset	612,000	656,000	Total liability and share holders Equity	612,000	656,000

Cash = total liability and equity – inventory- receivables – fixed asset

For prior year = 612000-111600-115200-376767= $8433

For current year= 656000-115200-122400-399600= $18,800

2. Return on Assets (ROA)= net income / Average total asset

Average total asset= last years asset + this year asset /2

= (612000+656000)/2

= 634000

Net income can be calculate by income statement

As per the given data, the current years income statement :

Particulars	Working	Amount
Sales		$         338,511
Less: Cost of goods sold		$         172,056
EBIT		$         166,455
Less: operating expense		$           68,673
Less: depreciation		$           22,097
Less : interest		$           16,721
EBT		$           58,964
Less: tax		$           18,710
Net profit	NP	$           40,254
Retained earning	R	$           14,400
Dividend paid	NP-R	$           25,854

Net income= 40254

ROA= 40254/634000

= 0.0635 or 6.35%

3. Return on Equity (ROE)= Net Income/ shareholders’ Equity

Net income= 40254

Shareholders equity = company’s total asset- total liability

= 656000-123300-137240

=395,460

ROE= 40254/395460

= 0.1018 or 10.18%

4. current year's entry for long-term debt on a common-size balance sheet:

Common sized balance sheet shows both numeric and percentage for total asset, total liability and total equity.

Long term debt in the current year= $137240

Long term debt as a percentage of total liability= 137240/656000= 0.209 or 20.9%