The Comparative Balance Sheets for Year 1 and Year 2 and the Year 2 Income Statement for Royal
Bros., Inc. are as follows:
Royal Bros, Inc.
Balance Sheet December 31, Year 1 December 31, Year 2 Assets Cash $ 54,000 $ 180,000 Accounts Receivable 540,000 360,000 Inventories 720,000 1,080,000 Property, Plant, and Equipment (net) 2,646,000 2,520,000 Total Assets $3,960,000 $4,140,000 Liabilities and Shareholders' Equity Accounts Payable $ 900,000 $ 680,400 5% Mortgage Payable 1,494,000 1,440,000 Common Stock 1,080,000 1,080,000 Retained Earnings 486,000 939,600 Total Liabilities and Shareholders' Equity $3,960,000 $4,140,000 Royal Bros, Inc. Income Statement For the Year Ended December 31, Year 2 Sales on Account $3,240,000 Less Expenses: Cost of Goods Sold (1,800,000) Salary Expense (594,000) Depreciation Expense (126,000) Interest Expense (72,000) Income before Income Taxes $ 648,000 Income Tax Expense at 35 percent (226,800) Net Income $ 421,200
Compute the following ratios for Royal Bros., Inc. for Year 2 or on December 31, Year 2 as appropriate.
a. Current Ratio on December 31, Year 2.
b. Quick Ratio on December 31, Year 2 (inventory cannot be quickly converted to cash). c. Debt Ratio on December 31, Year 2. d. Total Assets Turnover Ratio for Year 2. e. TIE Ratio for Year 2. f. Inventory Turnover Ratio for Year 2. g. DSO for Year 2. h. Long-Term Debt Ratio on December 31, Year 2. i. Fixed Asset Turnover Ratio for Year 2.