work_at_home_soultions_ch9[1]

work_at_home_soultions_ch9[1] - 1 Page 346 Exercise 9-1...

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Page 346 Exercise 9-1 Cost of goods sold ÷ Average inventory = $1,200,000 ÷ $200,000 = 6   times Exercise 9-2 Income before interest and taxes: $30,700 + $22,500 + $3,800 = $57,000. Income before interest and taxes ÷ Interest expense: $57,000 ÷ $3,800 = 15 times Exercise 9-3 When an account is written off, the net realizable value of accounts receivable remains unchanged. The debit to the allowance account and the credit to the receivables account offset each other. Therefore, the current ratio is unchanged. Exercise 9-4 a. Working capital before the transaction: Current assets – Current liabilities = $250,000 – $125,000 = $125,000 Working capital after the transaction: Current assets – Current liabilities = $275,000 – $150,000 = $125,000 b. Current ratio before the transaction: Current assets ÷ Current liabilities = $250,000 ÷ $125,000 = 2.0:1 Current ratio after the transaction: Current assets ÷ Current liabilities = $275,000 ÷ $150,000 = 1.8:1 1
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Exercise 9-5 a. Working capital before the transaction: $250,000 – $125,000 = $125,000 Working capital after the transaction: $275,000 – $125,000 = $150,000 b. Current ratio before the transaction: $250,000 ÷ $125,000 = 2.0:1 Current ratio after the transaction: $275,000 ÷ $125,000 = 2.2:1 Exercise 9-6 a. Hammond Corporation Income Statements 2008 2007 % Change Sales $1,250,000 $1,000,000 +25.0 Cost of goods sold 750,000 600,000 +25.0 Gross margin 500,000 400,000 +25.0 Operating expenses 300,000 200,000 +50.0 Income before taxes 200,000 200,000 +0.0 Income taxes 61,000 53,000 +15.1 Net income
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work_at_home_soultions_ch9[1] - 1 Page 346 Exercise 9-1...

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