Presented here are the comparative balance sheets of Hames Inc.at December 31, 2020 and...

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Accounting

Presented here are the comparative balance sheets of Hames Inc.at December 31, 2020 and 2019. Sales for the year ended December31, 2020, totaled $590,000.
Assets
2020
2019
Cash
$21,000
$19,000
Accounts receivable
78,000
72,000
Merchandise inventory
103,000
99,000
Total current assets
$202,000
$190,000
Land
50,000
40,000
Plant and equipment
125,000
110,000
Less: Accumulated depreciation
(65,000)
(60,000)
Total assets
$312,000
$280,000
Liabilities
Short-term debt
$18,000
$17,000
Accounts payable
$64,800
$75,000
Other accrued liabilities
$20,000
$18,000
Total current liabilities
$102,800
$110,000
Long-term debt
$22,000
$30,000
Total liabilities
$124,800
$140,000
Stockholders’ Equity
Common stock, no par, 100,000 shares authorized
40,000 and 25,000 shares issued, respectively
$74,000
$59,000
Retained earnings:
Beginning balance
$81,000
$85,000
Net income for the year
$52,200
$1,000
Dividends for the year
(20,000)
(5,000)
Ending balance
$113,200
$81,000
Total stockholders’ equity
$187,200
$140,000
Total liabilities and stockholders’ equity
$312,000
$280,000
Calculate ROI for 2020. (Do not round intermediatecalculations. Round your final answer to 2 decimal places.)___%
Calculate ROE for 2020. (Round your answer to 1 decimalplace.) _
Calculate working capital at December 31, 2020._
Calculate the current ratio at December 31, 2020.(Round your answer to 2 decimal places.)_
Calculate the acid-test ratio at December 31, 2020.(Round your answer to 2 decimal places.)_____
e

Answer & Explanation Solved by verified expert

3.8 Ratings (757 Votes)

a. ROI FOR 2020:

Formula= Net income/ Average assets

Average assets=( Total assets for 2019+Total assets for 2020)/2

=($280,000+$312,000)/2

=$296,000

ROI FOR 2020= $52,200/$296,000

=17.63%

B. ROE FOR 2020:

Formula= Net income/Average Stockholder's equity

Average stockholder's equity=( stockholder's equity for 2019+stockholder's equity for 2020)/2

=($140,000+$187,200)/2

=$163,600

ROE FOR 2020: =$52,200/$163,600

=31.90%

C. WORKING CAPITAL AT DECEMBER 31,2020:

Formula= Current assets for 2020- Current liabilities for 2020

=$202,000-$102,800

WORKING CAPITAL AT DECEMBER 31,2020: =$99,200

D. CURRENT RATIO AT DECEMBER 31,2020

Formula= Current assets for 2020/Current liabilities for 2020

=$202,000/$102,800

CURRENT RATIO AT DECEMBER 31,2020= 1.96:1

E. ACID TEST RATIO AT DECEMBER 31,2020:

Formula= Current assets- inventory- prepaid expenses for 2020/ Current liabilities for 2020

=$202,000-$103,000/$102,800

=$99,000/$102,800

ACID TEST RATIO AT DECEMBER 31,2020:=0.96:1

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