Instructions: Answer the problems and present your computation in a Power Point File.

Use the following to answer questions 15-30:

Gschwend Corporation's most recent balance sheet and income statement appear below:

Statement of Financial Position

December 31, Year 2 and Year 1
(in thousands of dollars)
Assets Year 2 Year 1
Current assets:
Cash $   140 $   130
Accounts receivable 160 140
Inventory 170 150
Prepaid expenses       90        90
Total current assets 560 510
Plant and equipment, net      840      900
Total assets $1,400 $1,410

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable $   150 $   150
Accrued liabilities 60 60
Notes payable, short term        60        60
Total current liabilities 270 270
Bonds payable      230      270
Total liabilities      500      540
Stockholders’ equity:
Preferred stock, $100 par value, 5% 200 200
Common stock, $1 par value 100 100
Additional paid-in capital–common stock 100 100
Retained earnings      500      470
Total stockholders’ equity      900      870
Total liabilities & stockholders’ equity $1,400 $1,410

Income Statement
For the Year Ended December 31, Year 2
(in thousands of dollars)
Sales (all on account) $1,370
Cost of goods sold      800
Gross margin 570
Selling and administrative expense      439
Net operating income 131
Interest expense        31
Net income before taxes 100
 Income taxes (30%)        30
Net income $     70

Dividends on common stock during Year 2 totaled $30 thousand. Dividends on preferred stock
totaled $10 thousand. The market price of common stock at the end of Year 2 was $4.86 per
share.

19. The dividend yield ratio for Year 2 is closest to:

A) 75.00%
B) 8.23%
C) 2.06%
D) 6.17%

20. The return on total assets for Year 2 is closest to:

A) 5.00%
B) 6.55%
C) 6.53%
D) 4.98%

21. The return on common stockholders' equity for Year 2 is closest to:
A) 6.78%
B) 7.91%
C) 8.76%
D) 10.22%

Ans:  C AACSB:  Analytic AICPA BB:  Critical Thinking AICPA FN:  Reporting

LO:  2 Level:  Medium

22. The book value per share at the end of Year 2 is closest to:
A) $0.60
B) $7.00
C) $9.00
D) $14.00

23. The working capital at the end of Year 2 is:

A) $840 thousand
B) $560 thousand
C) $290 thousand
D) $900 thousand
24. The current ratio at the end of Year 2 is closest to:
A) 0.36
B) 0.40
C) 0.89
D) 2.07
25. The acid-test ratio at the end of Year 2 is closest to:
A) 1.11
B) 1.12
C) 2.07
D) 1.44

26. The accounts receivable turnover for Year 2 is closest to:

A) 1.14
B) 8.56
C) 0.88
D) 9.13

27. The average collection period for Year 2 is closest to:

A) 1.1 days
B) 42.6 days
C) 0.9 days
D) 40.0 days

28. The inventory turnover for Year 2 is closest to:

A) 4.71
B) 0.88
C) 5.00
D) 1.13

29. The average sale period for Year 2 is closest to:

A) 45.3 days
B) 77.5 days
C) 213.1 days
D) 73.0 days

30. The times interest earned for Year 2 is closest to:

A) 4.23
B) 6.04
C) 2.26
D) 3.23