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    Taylor Tool Company

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    P15−2 Compute ratios from balance sheet and income statement.
    (SO 5)
    The comparative statements of Taylor Tool Company are presented below.
    Taylor Tool Company
    Income Statement
    For the Year Ended December 31
    2006 2005
    Net sales $1,818,500 $1,750,500
    Cost of goods sold 1,011,500 996,000
    Gross profit 807,000 754,500
    Selling and administrative expense 506,000 479,000
    Income from operations 301,000 275,500
    Other expenses and losses
    Interest expense 18,000 14,000
    Income before income taxes 283,000 261,500
    Income tax expense 84,000 77,000
    Net income $ 199,000 $ 184,500

    Taylor Tool Company
    Balance Sheets
    December 31
    Assets 2006 2005
    Current assets
    Cash $ 60,100 $ 64,200
    Short-term investments 69,000 50,000
    Accounts receivable (net) 107,800 102,800
    Inventory 133,000 115,500
    Total current assets 369,900 332,500
    Plant assets (net) 600,300 520,300
    Total assets $970,200 $852,800
    Liabilities and Stockholders' Equity
    Current liabilities
    Accounts payable $160,000 $145,400
    Income taxes payable 43,500 42,000
    Total current liabilities 203,500 187,400
    Bonds payable 200,000 200,000
    Total liabilities 403,500 387,400
    Stockholders' equity
    Common stock ($5 par) 280,000 300,000
    Retained earnings 286,700 165,400
    Total stockholders' equity 566,700 465,400
    Total liabilities and stockholders' equity $970,200 $852,800

    All sales were on account. The allowance for doubtful accounts was $3,200 on December 31, 2006, and $3,000 on December 31, 2005.

    Instructions
    Compute the following ratios for 2006. (Weighted average common shares in 2006 were 57,000.)
    1. Earnings per share.
    2. Return on common stockholders' equity.
    3. Return on assets.
    4. Current.
    5. Acid-test.
    6. Receivables turnover.
    7. Inventory turnover.
    8. Times interest earned.
    9. Asset turnover.
    10. Debt to total assets.

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    P15-2 Compute ratios from balance sheet and income statement.
    (SO 5)
    The comparative statements of Taylor Tool Company are presented below.
    Taylor Tool Company
    Income Statement
    For the Year Ended December 31
    2006 2005
    Net sales $1,818,500 $1,750,500
    Cost of goods sold 1,011,500 996,000
    Gross profit 807,000 754,500
    Selling and administrative expense 506,000 479,000
    Income from operations 301,000 275,500
    Other expenses and losses
    Interest expense 18,000 14,000
    Income before income taxes 283,000 261,500
    Income tax expense 84,000 77,000
    Net income $ 199,000 $ 184,500

    Taylor Tool Company
    Balance Sheets
    December ...

    Solution Summary

    This solution is comprised of a detailed explanation to compute ratios from balance sheet and income statement.

    $2.19

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