The Accounting Equation for Kirsten Company

Homework 4
Name
Institution/ Affiliation
Questions
1.Kirsten Company presented the following data at the end of 2019:
Cash

$1,800,000

Accounts receivable

3,200,000

Merchandise inventory

2,800,000

Prepaid insurance

300,000

Property & equipment

8,000,000

Accounts payable

750,000

Unearned revenue

800,000

Wages payable

1,600,000

Bonds payable

4,000,000

Determine the current ratio for Kirsten Company (rounded).
* 4.41
* 4.23
* 2.57
* 2.38
Current Ratio = current Assets/ current liabilities
Current assets = cash+ accounts receivable + prepaid insurance+ merchandise inventory
=1,800,000+3,200,000 + 2,800,000 + 300,000 = 8,100,000
Current liabilities= Accounts payable + wages payable+ unearned revenue
=750,000+800,000+1,600,000 = 3,150,000
Current ratio= 8,100,000/ 3,150,000 =2.5714
Hence the correct answer is C
2.Darmstadt Company presented the following data at the end of 2019:
Current liabilities

$450,000

Long-term debt

1,650,000

Deferred income taxes

600,000

Preferred stock

280,000

Common stock

980,000

Retained earnings

945,000

Determine the debt-to-total assets ratio for Darmstadt Company (rounded).
* 0.55
* 0.35
* 0.07
* 0.61
Debt ratio = Total debt/ Total assets
The correct answer is A.
3.Buick Company presented the following data at the end of 2019:
Current liabilities

$400,000

Long-term debt

2,200,000

Deferred income taxes

800,000

Preferred stock

320,000

Common stock

1,420,000

Retained earnings

1,080,000

Determine the debt-to-total assets ratio for Buick Company (rounded).
* 0.55
* 0.38
* 0.08
* 0.66
The correct answer is A.
4.Herbst Company presented the following data at the end of 2019:
Net sales revenue

$962,500

Cost of goods sold

375,000

Operating expenses

90,000

Income tax rate

25%

Determine the company’s return on sales (rounded)
* 37%
* 33%
* 30%
* 39%
Return of sales = operating income/ net sales
Net income = (962,500- 375,000-90, 0000) *75% = 373,125
Return ratio = 373,125/962500
=0.3876 or 39%
Hence the correct answer is D
5.Fruhling Company presented the following data at the end of 2019:
Net sales revenue

$1,100,000

Cost of goods sold

500,000

Operating expenses

240,000

Income tax rate

25%

Determine the company’s return on sales (rounded)
* 31%
* 28%
* 33%
* 25%
Return on sales= operating income/ revenue
= (1,100,000-500,000-240,000) *.75/1,100,000 = 0.2454 or 25%
Hence the correct answer D
6.Presented below is the Statement of Cash Flows for EMG Originals Clothing Company:
EMG OriginalS Clothing Company
Statement of Cash Flows
For Year Ended December 31, 2019



Cash flows from operating activities:


Received from sales to customers