Presented here are the comparative balance sheets of Hames Inc. at December 31, 2020 and 2019. Sales for the year ended December 31, 2020, totaled $1,700,000.

Required:

a. Calculate ROI for 2020. Round your percentage answer to two decimal places.

b. Calculate ROE for 2020. Round your percentage answer to one decimal place.

c. Calculate working capital at December 31, 2020.

d. Calculate the current ratio at December 31, 2020. Round your answer to two decimal places.

e. Calculate the acid-test ratio at December 31, 2020. Round your answer to two decimal places.

f. Assume that on December 31, 2020, the treasurer of Hames decided to pay $50,000 of accounts payable. Explain what impact, if any, this payment will have on the answers you calculated for parts a?d (increase, decrease, or no effect).

g. Assume that instead of paying $50,000 of accounts payable on December 31, 2020, Hames collected $50,000 of accounts receivable. Explain what impact, if any, this receipt will have on the answers you calculated for parts a?d (increase, decrease, or no effect).

Transcribed Image Text:

HAMES INC. Balance Sheets December 31, 2020 and 2019 2020 2019 Assets $ 57,000 $ 63,000 Cash 266,000 Accounts receivable 285,000 261,000 Merchandise inventory 247,000 Total current assets $609,000 $570,000 109,000 82,000 Land Plant and equipment Less: Accumulated depreciation 375,000 330,000 (195,000) (180,000) $898,000 Total assets $802,000 Liabilities $ 54,000 $ 51,000 Short-term debt 144,000 Accounts payable 168,000 Other accrued liabilities 68,000 54,000 $290,000 $249,000 Total current liabilities 56,000 105,000 Long-term debt . $354,000 Total liabilities $346,000 Stockholders' Equlty Common stock, no par, 200,000 shares authorized, 80,000 and 50,000 shares issued, respectively Retained earnings: $224,000 $162,000 Beginning balance.. $286,000 $217,000 Net income for the year 102,000 84,000 Dividends for the year (60,000) (15,000) Ending balance $328,000 $286,000 Total stockholders' equity Total liabilities and stockholders' equity $448,000 $552,000 $898,000 $802,000