Question

Panza Corporation experienced a fire on December 31, 2020, in which its financial records were partially destroyed. It has been able to salvage some of the records and has ascertained the following balances. December 31, 2020 December 31, 2019 Cash $ 33,500 $ 19,500 Accounts receivable (net) 80,000 125,500 Inventory 195,000 180,000 Accounts payable 50,000 93,500 Notes payable 29,000 62,000 Common stock, $100 par 411,000 411,000 Retained earnings 100,000 108,500 Additional information: 1. The inventory turnover is 2.2 times. 2. The return on common stockholders’ equity is 26%. The company had no additional paid-in capital. 3. The accounts receivable turnover is 7.0 times. 4. The return on assets is 12.5%. 5. Total assets at December 31, 2019, were $615,000. Compute the following for Panza Corporation. (a) Cost of goods sold for 2020 $ (b) Net credit sales for 2020. $ (c) Net income for 2020 $ (d) Total assets at December 31, 2020

Answer 1

Answer:

A. $412,500

B.$719,250

C.$133,965

D.$76,875

Explanation:

Panza Corporation

(a) Cost of goods sold for 2020

Formula

Inventory turnover ratio

= Cost of goods sold/(beginning inventory + ending inventory)/2

Hence:

2.2 = Cost of goods sold/(195,000+ 180,000)/2

2.2=375,000/2

2.2=187,500

=187,500×2.2

=Cost of goods sold $ 412,500

(b) Net sales (credit) for 2020

Using this formula

Accounts receivable turnover

= Net sales(credit)/ (beginning accounts receivable+ ending accounts receivable)/2

7.0=Net sales(credit) / (80,000 + 125,500)/2

7.0=205,500/2

7.0=102,750

=102,750×7.0

Net sales(credit) = $719,250

(c) Net income for 2020

Using this formula

Return on common stockholders’ equity

= Net income/average common stockholders’ equity

0.26 = Net income/(411,000+411,000+100,000+108,500)/2

0.26=1,030,500/2

0.26=515,250

=515,250×0.26

Net income = $133,965

(d) Total assets at December 31, 2020

Using this formula

Return on assets= Net income/(beginning total assets + ending total assets)/2

0.125 = (615,000 + ending total assets)/2

Total assets at December 31,2017 =$76,875