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Problem 14.

3A Measures of Liquidity (LO14-3, LO14-4)

Some of the accounts appearing in the year-end financial


statements of Rogand Grocery, Inc., appear as follows. This list
includes all of the company’s current assets and current liabilities.
 
      
Sales $ 1,880,000 
Accumulated depreciation: equipment   370,000 
Notes payable (due in 90 days)   70,000 
Retained earnings   241,320 
Cash   69,400 
Capital stock   150,000 
Marketable securities   175,040 
Accounts payable   128,100 
Mortgage payable (due in 15 years)   320,000 
Salaries payable   7,570 
Dividends   25,000 
Income taxes payable   14,600 
Accounts receivable   230,540 
Inventory   179,600 
Unearned revenue   10,000 
Unexpired insurance   4,500 

 
Required:
a. Prepare a schedule of the company’s current assets and current
liabilities. Select the appropriate items from the preceding list.
b-1. Compute the current ratio.
b-2. Compute the amount of working capital.
b-3. State whether you consider the company to be in a strong or
weak current position.
Problem 14.6A Financial Statement Analysis (LO14-4, LO14-5,
LO14-7)

Shown as follows is selected information from the financial


statements of Dickson, Inc., a retail furniture store.
 
            
From the balance sheet:           
Cash      $ 30,000 
150,00
Accounts receivable          
0
200,00
Inventory          
0
Plant assets (net of accumulated 500,00
         
depreciation) 0
150,00
Current liabilities          
0
300,00
Total stockholders' equity          
0
1,000,0
Total assets          
00
From the income statement:           
1,500,0
Net sales      $  
00
1,080,0
Cost of goods sold          
00
315,00
Operating expenses          
0
Interest expense         84,000 
Income tax expense         6,000 
Net income         15,000 
From the statement of cash
          
flows:
Net cash provided by operating
activities        
(including interest paid of $79,000) $ 40,000
Net cash used in investing activities        (46,000)
Financing activities:           
50,00
Amounts borrowed $        
0
(14,0
Repayment of amounts borrowed   )      
00
(20,0
Dividends paid   )      
00
Net cash provided by financing
        16,000 
activities
Net increase in cash during the year      $ 10,000 

 
Required:
b. Compute the following: (Round ratios to 1 decimal place.)
1. Current ratio
2. Quick ratio
3. Working capital
4. Debt ratio
d. Compute the following ratios (assume that the year-end amounts
of total assets and total stockholders’ equity also represent the
average amounts throughout the year). (Round your answers to
1 decimal place.)
1. Return on assets
2. Return on equity