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Balance sheet and income statement of Taylor Tool Company

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
Compute ratios from balance
sheet and income statement.
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.)
(a) Earnings per share. (f ) Receivables turnover.
(b) Return on common stockholders' equity. (g) Inventory turnover.
(c) Return on assets. (h) Times interest earned.
(d) Current. (i) Asset turnover.
(e) Acid-test. ( j) Debt to total assets.

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

Solution Preview

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 ...

Solution Summary

This solution is comprised of a detailed calculation to compute ratios from the balance sheet and income statement of Taylor Tool Company.

$2.19