Refer to the financial statements for Castile Products, Inc., in Exercise 158. Assets at the beginning of

Question:

Refer to the financial statements for Castile Products, Inc., in Exercise 15–8. Assets at the beginning of the year totaled $280,000, and the stockholders’ equity totaled $161,600.

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.

Balance Sheet

December 31

Assets

Current assets:

Cash …………………………………………………....................…. $ 6,500

Accounts receivable, net …………………………..........…….. 35,000

Merchandise inventory ……………………………...........……. 70,000

Prepaid expenses ………………………………..............…………. 3,500

Total current assets ……………………….............……………. 115,000

Property and equipment, net ………………......………..…. 185,000

Total assets ..…………………………......................…………. $ 300,000

Liabilities and Stockholders’ Equity

Liabilities:

Current liabilities ……………………………………….............. $ 50,000

Bonds payable, 10% ………………………………..............……. 80,000

Total liabilities ………………………………………................…. 130,000

Stockholders’ equity:

Common stock, $5 per value …………………………........…. 30,000

Retained earnings …………………………………..............……. 140,000

Total stockholders’ equity ……………………........…….……. 170,000

Total liabilities and stockholders’ equity ……………... $ 300,000

Castile Products, Inc.

Income Statement For the Year Ended

December 31

Sales …………………………………………...….............…. $ 420,000

Cost of goods sold ………………………….......…….……. 292,500

Gross margin ……………………………........………..…..… 127,500

Selling and administrative expenses …...………....... 89,500

Net operating income ………..……………….………….… 38,000

Interest expense ……………......…………………………...…. 8,000

Net income before taxes …..………………………………. 30,000

Income taxes (30%) ……………………………………............ 9,000

Net income ……………………………………………........... $ 21,000

Required:

Compute the following:

1. Gross margin percentage.

2. Net profit margin percentage.

3. Return on total assets.

4. Return on equity.

5. Was financial leverage positive or negative for the year? Explain.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...