Buffalo Corporation Balance Sheet March 31 Assets 2021 2020 Cash $18,340 $12,500 Notes receivable 147,090 132,010 Accounts receivable (net) 132,350
View the step-by-step solution to:

Question

Buffalo Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns

15% of the common stock, was one of the organizers of Buffalo and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2021, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,140 notes, which are due on June 30, 2021, and September 30, 2021. Another note of $5,990 is due on March 31, 2022, but he expects no difficulty in paying this note on its due date. Brown explained that Buffalo's cash flow problems are due primarily to the company's desire to finance a $301,430 plant expansion over the next 2 fiscal years through internally generated funds.


The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years.

Screen Shot 2019-12-11 at 1.27.32 PM.png

Screen Shot 2019-12-11 at 1.27.37 PM.png

(a)


Compute the following items for Buffalo Corporation. (Round answers to 2 decimal places, e.g. 2.25 or 2.25%.)


1.Current ratio for fiscal years 2020 and 2021.2.Acid-test (quick) ratio for fiscal years 2020 and 2021.3.Inventory turnover for fiscal year 2021.4.Return on assets for fiscal years 2020 and 2021. (Assume total assets were $1,672,060 at 3/31/19.)5.Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2020 to 2021.

Screen Shot 2019-12-11 at 1.27.32 PM.png

Buffalo Corporation
Balance Sheet
March 31
Assets
2021
2020
Cash
$18,340
$12,500
Notes receivable
147,090
132,010
Accounts receivable (net)
132,350
125,250
Inventories (at cost)
105,410
49,960
Plant & equipment (net of depreciation)
1,434,630
1,411,230
Total assets
$1,837,820
$1,730,950
Liabilities and Owners' Equity
Accounts payable
$79,720
$91,760
Notes payable
76,270
61,120
Accrued liabilities
5,340
11,960
Common stock (130,000 shares, $10 par)
1,305,620
1,311,870
Retained earnings
370,870
254,240
Total liabilities and stockholders' equity
$1,837,820
$1,730,950
Cash dividends were paid at the rate of $1 per share in fiscal year 2020 and $2 per share in fiscal year 2021.

Screen Shot 2019-12-11 at 1.27.37 PM.png

Buffalo Corporation
Income Statement
For the Fiscal Years Ended March 31
2021
2020
Sales revenue
$3,028,020
$2,712,300
Cost of goods solda
1,534,160
1,416,420
Gross margin
1,493,860
1,295,880
Operating expenses
861,150
775,180
Income before income taxes
632,710
520,700
Income taxes (40%)
253,084
208,280
Net income
$379,626
$312,420
Depreciation charges on the plant and equipment of $99,460 and $102,440 for fiscal years ended March 31, 2020 and 2021, respectively, are included in cost of goods sold.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question
Let our 24/7 Financial Accounting tutors help you get unstuck! Ask your first question.
A+ icon
Ask Expert Tutors You can ask You can ask ( soon) You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors