Answered Essay: Description

Balances Selected Balances
Acct No. Description 12/31/2015 12/31/2014
1100 Cash 84,500 73,050
1120 Accounts Receivable 247,450 253,975
1150 Merchandise Inventory 550,000 383,475
1160 Prepaid Insurance 4,800 2,400
1170 Store Supplies 4,000 750
1230 Store Equipment 569,500
1240 Accumulated Depreciation—Store Equipment 70,700 56,700
2100 Accounts Payable 209,000 198,525
2110 Salaries Payable 47,750 42,625
Long Term Notes 300,000 300,000
3100 Common Stock (10,000 shares issued, $25 Par) 250,000 250,000
3110 Capital in Excess of Par Value 100,000 100,000
3120 Dividends Paid 100,000
3200 Retained Earnings 335,300 335,300
4100 Sales 5,032,350 4,225,135
4110 Sales Returns and Allowances 113,700 15,955
4120 Sales Discounts 61,600 35,455
5100 Cost of Merchandise Sold 3,012,150 2,300,422
5200 Sales Salaries Expense 727,800
5210 Advertising Expense 292,000
5220 Depreciation Expense 14,000
5230 Store Supplies Expense 9,800
5290 Miscellaneous Selling Expense 12,600
5300 Office Salaries Expense 417,700
5310 Rent Expense 88,700
5320 Insurance Expense 12,000
5390 Miscellaneous Administrative Expense 7,800
5650 Interest Expense 15,000
Total Assets at 12/31/2014 1,125,138

1) liabilities to stockholders’ equity

2) net sales to assets

3) rate earned on total assets

4) rated earned on stockholders’ equity

5) rate earned on common stockholders’ equity

6) earnings per share on common stock

Expert Answer

 

Formula sheet

A B C D E F G H I J
2
3
4 Acct No. Description 42369 42004
5 1100 Cash 84500 73050
6 1120 Accounts Receivable 247450 253975
7 1150 Merchandise Inventory 550000 383475
8 1160 Prepaid Insurance 4800 2400
9 1170 Store Supplies 4000 750
10 1230 Store Equipment 569500
11 1240 Accumulated Depreciation—Store Equipment -70700 -56700
12 Total Assets =SUM(E5:E11) =F38
13 2100 Accounts Payable 209000 198525
14 2110 Salaries Payable 47750 42625
15 Long Term Notes 300000 300000
16 Total Liabilities =SUM(E13:E15) =SUM(F13:F15)
17 3100 Common Stock (10,000 shares issued, $25 Par) 250000 250000
18 3110 Capital in Excess of Par Value 100000 100000
19 3120 Dividends Paid 100000
20 3200 Retained Earnings 335300 335300
21 Total Shareholder’s Equity =SUM(E17:E18)+E20 =SUM(F17:F20)
22 Liabilities and shareholder’s equity =E16+E21 =F16+F21
23 4100 Sales 5032350 4225135
24 4110 Sales Returns and Allowances 113700 15955
25 4120 Sales Discounts 61600 35455
26 5100 Cost of Merchandise Sold 3012150 2300422
27 5200 Sales Salaries Expense 727800
28 5210 Advertising Expense 292000
29 5220 Depreciation Expense 14000
30 5230 Store Supplies Expense 9800
31 5290 Miscellaneous Selling Expense 12600
32 5300 Office Salaries Expense 417700
33 5310 Rent Expense 88700
34 5320 Insurance Expense 12000
35 5390 Miscellaneous Administrative Expense 7800
36 5650 Interest Expense 15000
37 Net Income =E23-SUM(E24:E36)
38 Total Assets at 12/31/2014 1125138
39
40
41 1)
42
43 Liabilities to shareholder’s equity =Average Liabilities / Average Shareholder’s Equity
44
45
46 Average Liabilities =(Total Liabilities at the Beginning of 2015 + Total Liabilities at the end of 2015)/2
47 =(E16+F16)/2
48
49 Average Shareholder’s Equity =(Equity at the Beginning of 2015 + Equity at the end of 2015)/2
50 =(F21+E21)/2
51
52 Liabilities to shareholder’s equity =Average Liabilities / Average Equity
53 =D47/D50
54
55 Hence Liaiblities to shareholder’s Equity =D53
56
57 2)
58 Net Sales =Sale – Sales Return and allowances – Sales Discounts
59 =E23-E24-E25
60
61 Assets =Average of Assets in 2015
62 =(Assets at the Beginning of 2015 + Assets at the end of 2015)/2
63 =(F12+E12)/2
64
65 Net Sales /Assets =D59/D63
66
67 3)
68
69 Net Income =E37
70 Assets =D61
71 =D63
72
73 Rate earned on total assets =D69/D71
74
75
76 4)
77
78 Rate earned on sharefholder’s Equity =Net Income /Average Shareholder’s Equity
79 =E37/D50
80
81 Hence Return on shareholder’s Equity =D79
82
83 5)
84 Rate earned on common shareholder’s Equity =(Income available to common Shareholders) /Average Shareholder’s Equity
85
86 Income available to common Shareholders =Increase in Retained Earnings + Dividends Paid (Assuming dividends Paid are dividends to common Shareholders)
87 =(E20-F20)+E19
88
89 Average Shareholder’s Equity =D50
90
91 Rate earned on common shareholder’s Equity =(Income available to common Shareholders) /Average Shareholder’s Equity
92 =D87/D89
93
94 Hence Rate earned on common shareholder’s Equity =D92
95
96
97 6)
98
99 Basic EPS can be calculated using following formula:
100
101 Basic EPS =( Income available to common Shareholders)/Weighted average of common shares during the period
102
103
104 Income available to common Shareholders =D87
105 Weighted average of common shares during the period =10000
106
107 Basic EPS =( Income available to common Shareholders)/Weighted average of common shares during the period
108 =D104/D105
109
110 Hence Basic EPS is =D108
111
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