confused on how to do this Comprehensive Problem 2 St of Ca

confused on how to do this

Comprehensive Problem 2 - St of Cash Flows and Ratios Algo R. Allen Inc. Income Statement For years ended December 31, 2017 and 2018 R. Allen Inc. Comparative Balance Sheets December 31, 2018 and 2017 50 points 2018 2017 Change 2018 2017 Current assets: Sales (all on credit) $528,000 $475,000 Cash $50,270 (321.000) (263.000) Accounts receivable (net) 38,000 44,000 1,200 1700 $31,700 $18,570 32,000 6,000 42,000 2,000 2,700 -1,500 2.600 -900 1110 24,170 299 Cost of goods sold Gross margin 207000 212,000 nventory Prepaid expenses 37,000 51,000 Other current assets 114,000 95,000 Total current assets 151,000 146,000 56.000 6600 Long-term Investments Depreciation expense Other operating expenses eBook 135,170 Total operating expenses Operating income 81,000 56,000 25.000 Other income expenses) Interest expense Gain on sale of investments Loss on sale of plant assets Total other income expenses) 307,000 (77,800) 229.200 445 370 257000 50,000 (51,000) 26,800 206,000 23.200 373000 72.370 Plant assets Less: accumulated 4700) 3,500) depreciation 5,500 3,900 Total plant assets (2,700) 3.200) otal assets (12,900 (2,800) Current liabilities Income before income taxes Income taxes expense Net income $25,500 3,600 1400 30,500 $26,000 S-500 3,000 600 5000 -3.600 34,000 -3,500 54,100 63,200 Accounts payable (16.230) 1.960) Accrued liabilities $37870 $44,240 Income taxes payable Total current liabilities R. Allen Inc. Statement of Retained Earnings For the year ended December 31, 2018 Long term liabilities: Notes Payable Total liabilities 236,000 266,500 175,000 61,000 209,000 57,500 2018 2017

Solution

Answer to Part 1.

Current Ratio = Current Assets / Current Liabilities
Current Ratio = 135,170 / 30,500
Current Ratio = 4.43: 1

Answer to Part 2.

Acid Test Ratio = (Current Assets – Inventory – Prepaid Expenses) / Current Liabilities
Acid Test Ratio = (135,170 – 44,000 – 1,200) / 30,500
Acid Test Ratio = 89,970 / 30,500
Acid Test Ratio = 2.95: 1

Answer to Part 3.

Inventory Turnover = Cost of Goods Sold / Average Inventory
Average Inventory = (44,000 + 42,000) / 2
Average Inventory = $43,000

Inventory Turnover = 321,000 / 43,000
Inventory Turnover = 7.47 times

Answer to Part 4.

Days’ Sales in Inventory = 365 / Inventory Turnover Ratio
Days’ Sales in Inventory = 365 / 7.47
Days’ Sales in Inventory = 48.86 or 49 days