CARVER INC. BALANCE SHEET DECEMBER 31, 2017 $ 45,000 $ 50,000 32,000 5,000 260,000 141,000 Cash Notes payable (short-term) Accounts payable Receivables $110,000 15,000 Accrued liabilities Common stock (par $5) Retained earnings Less: Allowance 95,000 Inventory Prepaid insurance Land 170,000 8,000 20,000 150,000 Equipment (net) $488,000 $488,000 CARVER INC. INCOME STATEMENT R THE YEAR ENDE DECEMBER 31, 2017 Sales revenue $1,400,000 Cost of goods sold Inventory, Jan. 1, 2017 Purchases $200,000 790,000 Cost of goods available for sale Inventory, Dec. 31, 2017 990,000 (170,000) Cost of goods sold 820,000 Gross profit on sales Operating expenses 580,000 170,000 Net income $ 410,000
(Ratio Computations and Effect of Transactions) Presented below is information related to Carver Inc.
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Instructions
(a) Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information provided indicates differently.
(1)
(2) Inventory turnover.
(3) Accounts receivable turnover.
(4) Earnings per share.
(5) Profit margin on sales.
(6) Return on assets on December 31, 2017.
(b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2017.
(1) Write off an uncollectible account receivable, $2,200.
(2) Purchase additional capital stock for cash.
(3) Pay $40,000 on notes payable (short-term).
(4) Collect $23,000 on accounts receivable.
(5) Buy equipment on account.
(6) Give an existing creditor a short-term note in settlement of account.
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