KING ABDULAZIZ UNIVERSITY

FACULTY of ECONOMICS & ADMINISTRATION

ACCOUNTING DEPARTMENT

FIRST SEMESTER (2020)

ACCT 213

Course Exercise (Chapter 18)

Instructor:
E-Mail:
Phone:
Office: -
Office Hours: -

Student’s Name Mohammed Khamis

Student’s Number 1945667

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 1. The following information pertains to Rural Company. Assume that all
balance sheet amounts represent both average and ending balance figures. Assume that all sales were
on credit.
Assets
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 40,000
Property, plant and equipment 220,000
Total Assets $330,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 70,000
Stockholders’ equity—common 200,000
Total Liabilities and Stockholders’ Equity $330,000

Income Statement
Sales $ 90,000
Cost of goods sold 44,000
Gross profit 46,000
Operating expenses 30,000
Net income $ 16,000
Number of shares of common stock 5,000
Market price of common stock $22
Dividends per share 1.00

What is the return on common stockholders’ equity for Rural?

a. 4.8%
b. 8%
c. 37.5%
d. 16%

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 2. The following information pertains to Rural Company. Assume that all
balance sheet amounts represent both average and ending balance
figures. Assume that all sales were on credit.
Assets
Cash and short-term investments $ 40,000
Accounts receivable (net) 30,000
Inventory 25,000
Property, plant and equipment 215,000
Total Assets $310,000
Liabilities and Stockholders’ Equity
Current liabilities $ 60,000
Long-term liabilities 75,000
Stockholders’ equity—common 175,000
Total Liabilities and Stockholders’ Equity $310,000
Income Statement
Sales $ 95,000
Cost of goods sold 45,000
Gross profit 50,000
Operating expenses 15,000
Net income $ 35,000
Number of shares of common stock 5,000
Market price of common stock $21
Dividends per share 1.00

What is the price-earnings ratio for Rural?

a. 8 times
b. 4.0 times
c. 7.0 times
d. 3.0 times

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 3. The following information is available for Oakland Company:
2014 2013
Accounts receivable $ 430,000 $ 460,000
Inventory 280,000 320,000
Net credit sales 2,670,000 1,600,000
Cost of goods sold 1,860,000 1,060,000
Net income 300,000 170,000

The accounts receivable turnover ratio for 2014 is

a. 1.4 times.
b. 6.2 times.
c. 6.0 times.
d. 5.8 times.

4. The following information is available for Oakland Company:

2014 2013
Accounts receivable $ 360,000 $ 400,000
Inventory 340,000 400,000
Net credit sales 2,470,000 1,400,000
Cost of goods sold 1,850,000 1,060,000
Net income 300,000 170,000

The inventory turnover ratio for 2014 is

a. 6.7 times.
b. 5.0 times.
c. 5.4 times.
d. 4.6 times.

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 5. The following amounts were taken from the financial statements of Leaf
Company:
2014 2013
Total assets $800,000 $880,000
Net sales 720,000 650,000
Gross profit 352,000 320,000
Net income 126,000 117,000
Weighted average number of common shares outstanding 90,000 90,000
Market price of common stock $35 $39

The return on assets ratio for 2014 is

a. 15.8%.
b. 15%.
c. 14.3%.
d. 14.5%.
6. The following amounts were taken from the financial statements of Leaf Company:
2014 2013
Total assets $900,000 $1,000,000
Net sales 840,000 650,000
Gross profit 352,000 320,000
Net income 138,600 117,000
Weighted average number of common shares outstanding 90,000 90,000
Market price of common stock $35 $39

The profit margin ratio for 2014 is

a. 15.4%.
b. 44.9%.
c. 16.5%.
d. 10.7%.

7. The following amounts were taken from the financial statements of Leaf Company:
2014 2013
Total assets $800,000 $1,000,000
Net sales 720,000 650,000
Gross profit 352,000 320,000
Net income 150,000 117,000
Weighted average number of common shares outstanding 50,000 90,000
Market price of common stock $64.50 $39

The price-earnings ratio for 2014 is

a. 21.5 times.
b. 36 times.
c. 4.5 times.
d. 3.0 times.

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