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3 years ago

Ramirez Corp. Balance Sheet December 31, 2018

Business

1 answer:

Lyrx [107]3 years ago

3 0

Answer:

1. At December 31, 2018, the current ratio was

d. 4,689 / 1,044

2. The number of times interest was earned during 2018 was

c. 1,650 / 150.

3. At December 31, 2018, the book value per share of common stock was

c. $59.40.

4. The rate of return for 2018 based on the year-end common stockholders' equity was

d. 1,005 / 3,564.

Explanation:

a) Data and Calculations:

Ramirez Corp. Balance Sheet December 31, 2018

Assets Equities

Cash $ 300,000 Accounts payable $ 630,000

Accounts receivable (net) 1,950,000 Income taxes payable 189,000

Inventories 2,439,000 Misc. accrued payables 225,000

Current assets $4,689,000 Current liabilities $1,044,000

Bonds payable

Plant and equipment, (8%, due 2020) 1,875,000

net of depreciation 1,983,000 Preferred stock ($100 par, 6%

Patents 261,000 cumulative nonparticipating) 750,000

Other intangible assets 75,000 Common stock (no par, 60,000

shares authorized, issued and

outstanding) 1,125,000

Total Assets 7,008,000 Retained Earnings 2,439,000

Treasury stock 1,500 shares of

preferred (225,000)

Total Equities 7,008,000

Ramirez Corp. Income Statement

Year Ended December 31, 2018

Net sales $ 9,000,000

Cost of goods sold 6,000,000

Gross profit 3,000,000

Operating expenses (including

bond interest expense) 1,500,000

Income before

income taxes 1,500,000

Income tax 450,000

Net income $ 1,050,000

Current ratio = Current assets/Current liabilities

= 4,689 / 1,044

Times interest earned = EBIT/Interest Expense

= $1,500,000 + 150,000/$150,000

= 1,650 / 150.

Book value per share =

Book value = Total assets - liabilities + preferred stock

= $7,008,000 - $3,444,000

= $3,564,000/60,000

= $59.40

Net income after cumulative preferred dividend

Net income = $1,050,000

Cumulative dividend 45,000 ($750,000 * 6%)

Income for common

stockholders $1,005,000

Common equity = $3,564,000

Rate of Return on common equity = $1,005,000/$3,564,000

= 0.28

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