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3 years ago

The following is the ending balances of accounts at December 31, 2016, for the Weismuller Publishing Company.

Business

1 answer:

Inessa05 [86]3 years ago

3 0

Answer:

<h2>Weismuller Publishing Company</h2>

Balance Sheet

As of December 31, 2016

Assets:

Current Assets:

Cash $65,000

Accounts receivable 160,000

less Allowance 16,000 144,000

Inventories 285,000

Prepaid expenses 148,000

Investments 140,000 $782,000

Long-term Assets:

Machinery and equipment 320,000

Accumulated

depreciation equipment 110,000 $210,000

Total Assets $992,000

Current Liabilities:

Accounts payable 60,000

Interest payable 20,000

Deferred revenue 80,000

Taxes payable 30,000

Notes payable 60,000

Total current liabilities $250,000

Long-term liabilities:

Notes payable 140,000

Equity:

Common stock

Authorized, 800,000 shares at no par

Issued & outstanding, 400,000 shares 400,000

Retained earnings 202,000

Total Equity $602,000

Total Liabilities + Equity $992,000

Explanation:

a) Data and Calculations:

Weismuller Publishing Company

Unadjusted Trial Balance as of December 31, 2016:

Account Title Debits Credits

Cash $65,000

Accounts receivable 160,000

Inventories 285,000

Prepaid expenses 148,000

Machinery and equipment 320,000

Accumulated depreciation equipment $110,000

Investments 140,000

Accounts payable 60,000

Interest payable 20,000

Deferred revenue 80,000

Taxes payable 30,000

Notes payable 200,000

Allowance for uncollectible accounts 16,000

Common stock 400,000

Retained earnings 202,000

Totals $1,118,000 $1,118,000

b) Notes Payable:

Current $60,000 ($40,000 + $20,000)

Long-term $140,000 ($200,000 - $60,000)

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Answer:

The Sales will increase by $350,000 (2000,000 * 17.5%)

Explanation:

As we know that,

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By putting values in Eq1, we have:

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Which means that Sales will increase by $350,000 (2000,000 * 17.5%) which is 17.5%.

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We know that:

Return on Equity = Net Income / Equity ..............Eq2

As we are not given value of Net Income we can not calculate the value of return on equity. But there is another way that we can calculate by simply multiplying and dividing by sales on Left hand side of the Eq2 equation.

Return on Equity = Net Income / Equity * Sales / Sales

By rearranging, we have:

Return on Equity = Net Income / Sales * Sales / Equity

Now here,

Net Income / Sales = Profit Margin

By putting this in the above equation, we have:

Return on Equity = Profit Margin * Sales / Equity

Here

Profit Margin is 7% given in the question.

Sales were $2,000,000

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By putting values, we have:

Return on Equity = 7% * $2,000,000 / $400,000

Return on Equity = 35%

Step 2. Find Equity

Equity = Assets - Liabilities

Here,

Assets are worth $1,400,000

Liabilities are standing at $1,000,000 which includes only current liabilities because company doesn't have any long term borrowings

By putting the values, we have:

Equity = $1,400,000 - $1,000,000 = $400,000

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