A partial balance sheet and income statement

Chapter 5: Problem 5-7


  1. Complete the increase (decrease) in dollars and percent.
  2. Comment on trends

Rapid Retail Comparative Statement of Income

December 31 Increase (Decrease)

(In thousands of dollars) 2011 2010 Dollars Percent

Net sales $30,000 $28,000


Cost of goods sold 20,000 19,500


Gross profit 10,000 8,500


Selling, general and

administrative expense 3,000 2,900


Operating income 7,000 5,600


Interest expense 100 80


Income before taxes 6,900 5,520


Income tax expense 2,000 1,600


Net income 4,900 3,920



Chapter 6: Problem 6-11

A partial balance sheet and income statement for King Corporation follow:


Partial Balance Sheet

December 31, 2011


Current assets:

Cash $ 33,493

Marketable securities 215,147

Trade receivables, less allowance of 6,000 255,000

Inventories LIFO 523,000

Prepaid expenses 26,180

Total current assets $ 1,052,820



Current liabilities:

Trade accounts payable $103,689

Notes payables (primarily to banks) and commercial paper 210,381

Accrued expenses and other liabilities 120,602

Income taxes payable 3,120

Current maturities of long term debt 22,050


Total current liabilities 459,842




Partial Balance Sheet

December 31, 2011


Net sales $3,050,600

Miscellaneous income 45,060


Costs and expenses:

Cost of Sales $2,184,100

Selling, general, and administrative expenses 350,265

Interest expense 45,600

Income taxes 300,000


Net income $ 214,695


Note: The trade receivables at December 31, 210, were $280,000, net of an allowance of $8,000 for a gross receivables figure of $288,000. The inventory at December 31, 2010, was $565,000.


Required: Compute the following;


a. Working capital

b. Current ratio

c. Acid-test ratio

d. Cast ratio

e. Day’s sales in receivables

f. Accounts payables

g. Day’s sales in inventory

h. Inventory turnover in days

i. Operating cycle


Problem 6-15

The following financial data were taken from the annual financial statements of Smith Corporation.

2009 2010 2011

Current assets $ 450,000 $ 400,000 $ 500,000

Current liabilities 390,000 300,000 340,000

Sales 1,450,000 1,500,000 1,400,000

Cost of goods sold 1,180,000 1,020,000 1,120,000

Inventory 280,000 200,000 250,000

Accounts receivable 120,000 110,000 105,000



  1. Based on these data, calculate the following for 2010 and 2011:

1. Working capital

2. Current ratio

3. Acid-test ratio

4. Accounts receivables turnover

5. Merchandise inventory turnover

6. Inventory turnover in days


  1. Evaluate the results of your computations in regard to the short-term liquidity of the firm.
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