E13-19B (Ratio Computations and Effect of Transactions) Presented below is information related to Lakeland Inc. LAKELAND INC. BALANCE SHEET DECEMBER 31, 2014 Cash $ 8,000 Notes payable (short-term) $ 92,000 Receivables $175,000 Accounts payable 163,000 Le
mujionostevoE13-19B (Ratio Computations and Effect of Transactions) Presented below is information related to Lakeland Inc.
LAKELAND INC.
BALANCE SHEET
DECEMBER 31, 2014
Cash $ 8,000 Notes payable (short-term) $ 92,000
Receivables $175,000 Accounts payable 163,000
Less: Allowance 20,000 155,000 Accrued liabilities 18,000
Inventories 271,000 Capital stock (par $1) 72,000
Prepaid insurance 6,000 Retained earnings 298,000
Land 50,000
Equipment (net) 153,000
$643,000 $643,000
LAKELAND INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2014
Sales $2,800,000
Cost of goods sold
Inventory, Jan. 1, 2012 $ 200,000
Purchases 2,031,000
Cost of goods available for sal 2,231,000
Inventory, Dec. 31, 2012 271,000
Cost of goods sold 1,960,000
Gross profit on sales 840,000
Operating expenses 506,000
Net income $ 334,000
Instructions
(a) Compute the following ratios or relationships of Lakeland Inc. Assume that the ending account balances are representative unless the information provided indicates differently.
(1) Current ratio.
(2) Inventory turnover.
(3) Receivables turnover.
(4) Earnings per share.
(5) Profit margin on sales.
(6) Rate of return on assets on December 31, 2014.
(b) Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Lakeland Inc. at December 31, 2014.
(1) Write off an uncollectible account receivable, $6,800.
(2) Repurchase capital stock for cash.
(3) Pay $46,000 on notes payable (short-term).
(4) Collect $70,000 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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