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Balance Sheet, Schedule of Cash Receipts

66. Complete the following balance sheet for the Range Company using the following information:

Debt to Assets = 60 percent
Quick Ratio = 1.1
Asset Turnover = 5x
Fixed Asset Turnover = 12.037x
Current Ratio = 2
Average Collection Period = 16.837 days

Cash Current Liabilities ______
Receivables ________ Bonds Payable ______
Inventory ________ Total Liabilities ______
Total Current Assets ________ Net Worth ______
Plant and Equipment ________ Total Liabilities and Net Worth ______
Total Assets \$325,000

Assume all sales are on credit and a 360-day year.

67. Frank's Sporting Goods projects sales for the second quarter of 200X to be as follows:

April \$100,000 May \$120,000 June \$110,000

10% of Frank's sales are for cash, 70% of accounts receivable are collected one month following the sale, and the rest are collected two months following the sale. January sales were \$40,000, February sales were \$60,000, and March sales were \$80,000.

a) Prepare a monthly schedule of cash receipts for the second quarter of 200X.
b) What is the balance in accounts receivable at the end of June?

a) February March April May June

68. Linkup Systems, which provides investors with computerized information about stock prices, is considering the establishment of a lockbox system with its bank. The firm receives daily remittances of \$1.5 million, and could earn 9% on any funds freed up through faster collections. If the lockbox system can save 2 days in the collection process, and the firm's bankers will charge \$200,000 per year to operate the lockbox system, is it worth it to establish the system? Show your work to support your decision.

69. Gray House is issuing bonds paying \$105 annually that will mature fifteen years from today. The bond is currently selling for \$980.

Calculate:
a) Coupon Rate
b) Current Yield
c) Yield To Maturity

See attached file for full problem description.

Solution Preview

66. Complete the following balance sheet for the Range Company using the following information:

Debt to Assets = 60 percent
Quick Ratio = 1.1
Asset Turnover = 5x
Fixed Asset Turnover = 12.037x
Current Ratio = 2
Average Collection Period = 16.837 days

Cash \$ 28,500 Current Liabilities \$ 95,000
Receivables \$ 76,000 Bonds Payable \$100,000
Inventory \$ 85,500 Total Liabilities \$195,000
Total Current Assets \$190,000 Net Worth \$130,000
Plant and Equipment \$135,000 Total Liabilities and Net Worth \$325,000
Total Assets \$325,000

Assume all sales are on credit and a 360-day year.

1. Total Assets = Total Liabilities + Net Worth
2. Debt to Assets = 60%, which means that Net Worth is equal to 40%.

Debt to Assets = Debt/Total Assets
60% = Debt/\$325,000
Debt = \$195,000

Net worth = \$325,000 x 40% = \$130,000

3. Asset Turnover = 5x
Asset Turnover = Sales/Total Assets
5 = Sales/\$325,000
Sales = 1,625,000

4. Fixed Asset Turnover = 12.037x
Fixed Asset Turnover = Sales/Total Fixed Assets
12.037=1,625,000/Total Fixed Assets
Total Fixed Assets = 135,000

5. Total Current Assets = Total Assets - Total Fixed Assets
Total Current Assets = \$325,000 - \$135,000
Total Current Assets = \$190,000

6. Current Ratio = 2
Current Ratio = Current Assets/Current Liabilities
2 = \$190,000/Current ...

Solution Summary

This solution is comprised of a detailed explanation to prepare the balance sheet and schedule of cash receipts.

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