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Part 1: Royal Bros., Inc. Question The Comparative Balance Sheets for Year 1 and Year 2 and the Year 2 Income Statement for Royal Bros., Inc. are as follows: Royal Bros, Inc. Balance Sheet December 31, Year 1 December 31, Year 2 Assets Cash $ 54,000 $ 180,000 Accounts Receivable 540,000 360,000 Inventories 720,000 1,080,000 Property, Plant, and Equipment (net) 2.646.000 2.520.000 Total Assets $3.960,000 $4,140,000 Liabilities and Shareholders' Equity Accounts Payable $ 900,000 $ 680,400 5% Mortgage Payable 1,494,000 1,440,000 Common Stock 1,080,000 1,080,000 Retained Earnings 486.000 939,600 Total Liabilities and Shareholders' Equity $3.960,000 $4.140,000 Royal Bros, Inc. Income Statement For the Year Ended December 31, Year 2 Sales on Account 2 Less Expenses: Cost of Goods Sold Salary Expense Depreciation Expense Interest Expense Income before Income Taxes Income Tax Expense at 35 percent Net Income $3,240,000 (1,800,000) (594,000) (126,000) (72.000) $ 648,000 (226,800) $421,200
Part 1 Requirement Required: Compute the following ratios for Royal Bros., Inc. for Year 2 or on December 31. Year 2 as appropriate. (1): Rate of Return on Assets for Year 2. (2): Rate of Return on Common Shareholders' Equity for Year 2. (3): Total Assets Tumover Ratio for Year 2. (4): Inventory Turnover Ratio for Year 2. (5): Average Number of Days Inventory on Hand for Year 2. (6): Accounts Receivable Turnover Ratio for Year 2. (7): Average Collection Period for Accounts Receivable for Year 2. (8): Debt Coverage Ratio on December 31, Year 2 (9): Fixed Asset Turnover Ratio for Year 2. (10): Accounts Payable Turnover Ratio, Part 2: Royal Bros., Inc. Question In continuation of Royal Bros., Inc. Question, below is information about cost of goods sold, beginning and ending inventories, and average accounts payable for Years 3, 4 and 5: Year 3 Year 4 Year 5 Cost of Goods Sold $1,895,400 $2,079,000 $2,250,000 Beginning Inventory $1,080,000 $$40,000 $1,116,000 Ending Inventory $540,000 $1,116,000 $525,600 Average Accounts $226,800 $482,400 $324,000 Payable Royal Bros.' makes it purchases of inventory on credit terms of "net 45 days". Part 2 Requirement (1): Compute the accounts payable turnover for each year. (2): Evaluate Royal Bros.' management of its accounts payable over the three-year period. Part 3: Royal Bros., Inc. Question In continuation of Royal Bros., Inc. Question, below is information about sales, cost of goods sold and average inventory for Years 3, 4, and 5: Year 3 Year 4 Year 5 Sales (all on credit) $3,510,000 $3,960,000 $4,500,000 Cost of Goods Sold $1,895,400 $2,079,000 $2,250,000 Average Inventory $810,000 $828,000 $820,800
Part 3 Requirement (1): Compute the inventory turnover for each year. (2): Compute the average number of days that inventory is on hand each year. (3): What percentage is cost of goods sold to sales for each year? (4); Evaluate Royal Bros.' management of its inventories over the three years Part 4: Royal Bros., Inc. Question In continuation of Royal Bros., Inc. Question, below is information about sales and average accounts receivable for Years 3, 4, and 5. Royal Bros.' credit terms are net 30 days. Year 3 Year 4 Year 5 $3,510,000 $3,960,000 $4,500,000 Sales (all on credit) Average Accounts $540,000 $720,000 $900,000 Receivable Part 4 Requirement (1): Compute the accounts receivable turnover for each year. (2): Compute the average collection period for accounts receivable for each year. (3): Evaluate Royal Bros.' management of its accounts receivable over the three-year period. End of Homework 3
Answer Sheet for Royal Bros., Inc. Question (Homework 3) Name: ID: Section: Delivery Date: Wednesday, 8/6/2022 Part 1 Requirement (1): Rate of Return on Assets for Year 2. (2): Rate of Return on Common Shareholders' Equity for Year 2. (3): Total Assets Turnover Ratio for Year 2. (4): Inventory Turnover Ratio for Year 2. (5): Average Number of Days Inventory on Hand for Year 2. (6): Accounts Receivable Tumover Ratio for Year 2. (7): Average Collection Period for Accounts Receivable for Year 2. (8): Debt Coverage Ratio on December 31, Year 2. (9): Fixed Asset Turnover Ratio for Year 2. (10): Accounts Payable Turnover Ratio.
5 Part 2 Requirement (1): Compute the accounts payable turnover for each year. (2): Evaluate Royal Bros.' management of its accounts payable over the three-year period. Part 3 Requirement (1): Compute the inventory turnover for each year. (2): Compute the average number of days that inventory is on hand each year. (3): What percentage is cost of goods sold to sales for each year? (4); Evaluate Royal Bros.' management of its inventories over the three years Part 4 Requirement (1): Compute the accounts receivable turnover for each year. (2): Compute the average collection period for accounts receivable for each year. (3): Evaluate Royal Bros.' management of its accounts receivable over the three-year period. End of Answer Sheet for Homework 3