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Ratio Analysis for the Bennis Company

E18-7
Bennis Company has the following comparative balance sheet data:
Bennis Company
Balance Sheet (Partial)
December 31, 2010
2011 2012

Cash $15,000 $30,000
Receivables (net) 70,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 200,000 180,000
$345,000 $320,000

Accounts Payable $50,000 $60,000
Mortgage Payable 100,000 100,000
Common Stock, $10 par value 140,000 120,000
Retained Earnings 55,000 40,000
$345,000 $320,000

Additional information for 2011:
1). Net income was $25,000.
2). Sales on account were $410,000. Sales returns and allowances were $20,000.
3). Cost of goods sold was $198,000.
4). The allowance for doubtful accounts was $2,500 on December 31, 2011, and $2,000
on December 31, 2010.

Instructions:
Compute the following ratios at December 31, 2011. (a) Current, (b) Acid-test, (c) Receivables turnover, (d) Inventory turnover.

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Solution Summary

E18-7
Bennis Company has the following comparative balance sheet data:
Bennis Company
Balance Sheet (Partial)
December 31, 2010 2011 2012

Cash $15,000 $30,000
Receivables (net) 70,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 200,000 180,000
$345,000 $320,000

Accounts Payable $50,000 $60,000
Mortgage Payable 100,000 100,000
Common Stock, $10 par value 140,000 120,000
Retained Earnings 55,000 40,000
$345,000 $320,000

Additional information for 2011:
1). Net income was $25,000.
2). Sales on account were $410,000. Sales returns and allowances were $20,000.
3). Cost of goods sold was $198,000.
4). The allowance for doubtful accounts was $2,500 on December 31, 2011, and $2,000
on December 31, 2010.

Instructions:
Compute the following ratios at December 31, 2011. (a) Current, (b) Acid-test, (c) Receivables turnover, (d) Inventory turnover.

$2.19