3.

Neale Corporation
Financial Statement

Balance Sheet: Current Year Prior Year

Cash 20,000 22,000

short-term Investments 30,000 26,000
Accounts Receivable, net 64,000 73,000
Inventory 75,000 71,000
Prepaid Expenses 16,000 8,000
Total Current Assets 205,000 200,000
Total Current Liabilities 125,000 91,000

Income Statement:

Net Credit Sales 545,000

Cost of Goods Sold 397,000

a. Current Ratio = Current Assets

Current Liabilities

205,000 = 1.6
125,000
b. Acid-test Ratio = Cash + Short term Investment + Net Current Receivables
Current Liabilities

$20,000 + $30,000 + $64,000 = $114,000 = 0.9

125,000 $125,000

c. Inventory Turnover = Cost of goods Sold

Average Inventory

Average Inventory = Opening Inventory + Closing Inventory = $75,000 + $71,000 =

2 2

$146,000 = $73,000
2

$397,000 = 5.4 Times

$73,000

d. Accounts Receivable turnover= Net Sales

Average Net Accounts Receivable

Average Net Accounts Receivable = Opening Receivable + Closing Receivable

2

= $64,000 + $73,000 = $137,000 = $68,500

2 2

= $545,000 = 8.0 Times

$68,000

e. Day’s Sales in average receivables to the nearest day = Average net accounts receivables
One day’s Sales

= $68,500
$545,000/ 365

= $68,500 = 45.9
$1,493.15
4.

Tavis Corporation
Income Statement
For the Year Ended December 31, 2015

$
Net Sales 194,000
Cost of Goods Sold 93,000
Gross Profit 101,000
Selling and General Expense 66,000
Income from Operations 35,000
Interest Expense 9,000
Income before Income Tax 26,000
Income Tax Expense 8,000
18,000

Additional Data :

Total Assets 204,000

Common Stockholders' Equity 96,000
Preferred Dividends 4,000

a. Return on Sales = Net Income

Net Sales

= $18, 000 = 0.09%

$194,000

b. Return on Assets = Net Income + Interest Expense

Average Total Assets

= $18,000 + $9,000 * 100 = $27,000 * 100 = 13.2%

$204,000 $204,000
c. Return on Equity = Net Income – Preferred Dividends
Average Common Stockholders’ Equity

= $18,000 - $4,000 *100 = $14,000 * 100 = 15.2%

$96,000 - $4,000 $92,000