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Following is the balance sheet of Walton Company for Year 3: WALTON COMPANY Balance sheetAssets Cash$14,550 Marketable securities 8,420 Accounts receivable 12,860 Inventory 11,450 Property and equipment 167,000 Accumulated depreciation (12,400)Total assets$201,880 Liabilities and Stockholders' Equity Accounts payable$8,690 Current notes payable 3,480 Mortgage payable 4,050 Bonds payable 21,360 Common stock 113,700 Retained earnings 50,600 Total liabilities and stockholders' equity$201,880 The average number of common stock shares outstanding during Year 3 was 880 shares
Following is the balance sheet of Walton Company for Year 3:
WALTON COMPANY
Balance sheetAssets Cash$14,550 Marketable securities 8,420 Accounts receivable 12,860 Inventory 11,450 Property and equipment 167,000 Accumulated depreciation (12,400)Total assets$201,880 Liabilities and Stockholders' Equity Accounts payable$8,690 Current notes payable 3,480 Mortgage payable 4,050 Bonds payable 21,360 Common stock 113,700 Retained earnings 50,600 Total liabilities and stockholders' equity$201,880
The average number of common stock shares outstanding during Year 3 was 880 shares. Net income for the year was $14,600.
Required
Compute each of the following: (Round your answer to 2 decimal places. For percentages, 0.2345 should be entered as 23.45.)
A: Current Ratio
B: Earnings Per Share
C: Quick (Acid Test) Ratio
D: Return of Investment %
E: Return of Equity %
F: Debt to Equity Ratio
Expert Solution
| Ans. A | Current ratio = Total current assets / Total current liabilities | ||
| $47280 / $12,170 | |||
| 3.88 to 1 | |||
| *Calculations for total current assets: | |||
| Assets: | Walton Company | ||
| Cash | $14,550 | ||
| Marketable securities | $8,420 | ||
| Accounts receivables | $12,860 | ||
| Inventory | $11,450 | ||
| Total current assets | $47,280 | ||
| *Calculations for total current liabilities: | |||
| Liabilties | Walton Company | ||
| Accounts payable | $8,690 | ||
| Current notes payable | $3,480 | ||
| Total current liabilities | $12,170 | ||
| Ans. B | Earnings per share = Net income / Common stock outstanding | ||
| $14,600 / 880 | |||
| $16.59 | per share | ||
| Ans. C | Acid test ratio = (Total current assets - Inventory) / Total current liabilities | ||
| ($47,280 - $11,450) / $12,170 | |||
| $35,830 / $12,170 | |||
| 2.94 to 1 | |||
| Ans. D | Return on assets = Net income / Total assets * 100 | ||
| $14,600 / $201,880 * 100 | |||
| 7.23% | |||
| Ans. E | Return on equity = Net income / Common stockholder's equity * 100 | ||
| $14,600 / $164,300 * 100 | |||
| 8.89% | |||
| *Calculations for total stockholder's equity : | |||
| Equity | Walton Company | ||
| Common stock | $113,700 | ||
| Retained earnings | $50,600 | ||
| Total stockholder's equity | $164,300 | ||
| Ans. F | Debt to equity ratio = Total liabilities / Total stockholder's equity | ||
| $37,580 / $164,300 | |||
| 0.23 : 1 | |||
| *Calculations for total liablities : | |||
| Total liabilities = Total assets - Total stockholder's equity | |||
| $201,880 - $164,300 | |||
| $37,580 | |||
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