Financial Statement Analysis Page 36
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50Financial Statement Analysis
709
Sales
$3,000,000
Cost of goods sold
2,650,000
Merchandise inventory
Beginning of year
380,000
End of year
620,000
Required
Assuming that the merchandise inventory buildup was relatively constant, how many times did
the merchandise inventory turn over during 2008?
Exercise 13-2B
Number of times interest earned
LO 5
The following data come from the financial records of the Jensen Corporation for 2007.
Sales
$1,600,000
Interest expense
100,000
Income tax
280,000
Net income
520,000
Required
How many times was interest earned in 2007?
Exercise 13-3B
Current ratio
LO 4
Mayer Corporation purchased $350 of merchandise on account.
Required
Explain the effect of the purchase on Mayer’s current ratio.
Exercise 13-4B
Working capital and current ratio
LO 4
On October 31, 2008, Oram Company’s total current assets were $45,000 and its total current liabil-
ities were $20,000. On November 1, 2008, Oram purchased marketable securities for $10,000 cash.
Required
a. Compute Oram’s working capital before and after the securities purchase.
b. Compute Oram’s current ratio before and after the securities purchase.
Exercise 13-5B
Working capital and current ratio
LO 4
On October 31, 2008, Oram Company’s total current assets were $45,000 and its total current
liabilities were $20,000. On November 1, 2008, Oram bought manufacturing equipment for
$10,000 cash.
Required
a. Compute Oram’s working capital before and after the equipment purchase.
b. Compute Oram’s current ratio before and after the equipment purchase.
Exercise 13-6B
Horizontal analysis
LO 2
Toby Corporation reported the following operating results for two consecutive years.
2008
2007
Percentage Change
Sales
$460,000
$400,000
Cost of goods sold
264,000
254,000
Gross margin
196,000
146,000
Operating expenses
75,000
65,000
Income before taxes
121,000
81,000
Income taxes
55,000
31,600
Net income
$ 66,000
$ 49,400
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