Problem 142A The comparative statements of Painter Tool Comp

Problem 14-2A The comparative statements of Painter Tool Company are presented below PAINTER TOOL COMPANY Income Statement For the Years Ended December 31 2017 2016 Net sales Cost of goods sold Gross profit Selling and administrative expenses Income from operations Other expenses and losses $1,810,600 1,010,100 800,500 520,200 280,300 $1,752,800 994,000 758,800 475,800 283,000 Interest expense Income before income taxes Income tax expense Net income 17,400 262,900 80,500 $182,400 13,400 269,600 77,100 $ 192,500 PAINTER TOOL COMPANY Balance Sheets December 31 Assets 2017 2016 Current assets Cash Short-term investments Accounts receivable (net) Inventory $59,800 68,900 117,600 122,500 368,800 $63,800 50,000 101,300 115,400 330,500 Total current assets

Solution

(a) Earnings per share

Earnings per share = [Net Income / Weighted Average number of common shares ]

= $182,400 / [(55,000 Shares + 59,660 Shares) / 2 ]

= $182,400 / 57330 Shares

= $3.18 per share

(b) Return on common stockholders’ equity

Return on common stockholders’ equity = [ Net Income / Average common stockholders’ equity ]

= [$182400 / {(569400 + 469000) /2} ] x 100

= 35.1%

(c) Return on assets

Return on assets= [ Net Income / Average Total Assets ]

= [$182400 / { (967100 + 851600) /2} ] x 100

= 20.1%

(d) Current ratio

Current ratio = Total Current Assets / Total Current Liabilities

= $368800 / 202100

= 1.82 : 1

(e) Acid Test ratio

Current ratio = [Total Current Assets – Inventory] / Total Current Liabilities

= [$368800 – 122500] / 202100

= 1.22 : 1

(f) Accounts receivable turnover

Accounts receivable turnover = Net Sales / Average Accounts Receivable

= $1810600 / [(117600 + 101300) / 2 ]

= 16.5 Times

(g) Inventory turnover

Inventory turnover = Cost of goods sold /Average Inventory

= $10,10,100 / [(122500 + 115400 ) / 2 ]

= 8.5 Times

(h) Times interest earned

Times interest earned = [Net Income + Income Tax + Interest Expenses ] / Interest Expenses

= [182400 + 80500 + 17400] / 17400

= 16.1 Times

(i)Asset turnover

Asset turnover = Sales / Average Total Assets

= $18,10,600 / {(967,100 + 851,600 /2}

= 2 Times

(j) Debt to assets ratio

Debt to assets ratio = Total Debt / Total Assets

= [397,700 / 967,100] x 100

= 41.1%