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The financial statements for Castile Products, Inc., are given below:
| Castile Products, Inc. Balance Sheet December 31 |
| Assets | | |
| Current assets: | | |
| Cash | $ | 20,000 |
| Accounts receivable, net | | 240,000 |
| Merchandise inventory | | 400,000 |
| Prepaid expenses | | 8,000 |
| Total current assets | | 668,000 |
| Property and equipment, net | | 840,000 |
| Total assets | $ | 1,508,000 |
| Liabilities and Stockholders' Equity |
| Liabilities: | | |
| Current liabilities | $ | 300,000 |
| Bonds payable, 12% | | 310,000 |
| Total liabilities | | 610,000 |
| Stockholders equity: | | |
| Common stock, $10 par value | $ | 180,000 |
| Retained earnings | | 718,000 |
| Total stockholders equity | | 898,000 |
| Total liabilities and stockholders equity | $ | 1,508,000 |
| |
| Castile Products, Inc. Income Statement For the Year Ended December 31 |
| Sales | $ | 3,895,000 |
| Cost of goods sold | | 1,500,000 |
| Gross margin | | 2,395,000 |
| Selling and administrative expenses | | 580,000 |
| Net operating income | | 1,815,000 |
| Interest expense | | 37,200 |
| Net income before taxes | | 1,777,800 |
| Income taxes (30%) | | 533,340 |
| Net income | $ | 1,244,460 |
| |
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $350,000. All sales were on account.
Required:
Compute the following financial data and ratios:
1. Working capital.
2. Current ratio. (Round your answer to 1 decimal place.)
3. Acid-test ratio. (Round your answer to 2 decimal places.)
4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
5. Times interest earned ratio. (Round your answer to 2 decimal places.)
6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)
The financial statements for Castile Products, Inc., are given below:
| Castile Products, Inc. Balance Sheet December 31 |
| Assets | | |
| Current assets: | | |
| Cash | $ | 20,000 |
| Accounts receivable, net | | 240,000 |
| Merchandise inventory | | 400,000 |
| Prepaid expenses | | 8,000 |
| Total current assets | | 668,000 |
| Property and equipment, net | | 840,000 |
| Total assets | $ | 1,508,000 |
| Liabilities and Stockholders' Equity |
| Liabilities: | | |
| Current liabilities | $ | 300,000 |
| Bonds payable, 12% | | 310,000 |
| Total liabilities | | 610,000 |
| Stockholders equity: | | |
| Common stock, $10 par value | $ | 180,000 |
| Retained earnings | | 718,000 |
| Total stockholders equity | | 898,000 |
| Total liabilities and stockholders equity | $ | 1,508,000 |
| |
| Castile Products, Inc. Income Statement For the Year Ended December 31 |
| Sales | $ | 3,895,000 |
| Cost of goods sold | | 1,500,000 |
| Gross margin | | 2,395,000 |
| Selling and administrative expenses | | 580,000 |
| Net operating income | | 1,815,000 |
| Interest expense | | 37,200 |
| Net income before taxes | | 1,777,800 |
| Income taxes (30%) | | 533,340 |
| Net income | $ | 1,244,460 |
| |
Account balances at the beginning of the year were: accounts receivable, $170,000; and inventory, $350,000. All sales were on account.
Required:
Compute the following financial data and ratios:
1. Working capital.
2. Current ratio. (Round your answer to 1 decimal place.)
3. Acid-test ratio. (Round your answer to 2 decimal places.)
4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)
5. Times interest earned ratio. (Round your answer to 2 decimal places.)
6. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
7. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)
8. Operating cycle. (Round your intermediate calculations and final answer to 1 decimal place.)
Answer & Explanation
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