Presented below is information related to Carver Inc.

Instructions

a. Compute the following ratios or relationships of Carver Inc. Assume that the ending account balances are representative unless the information provided indicates differently.

1. Current ratio.

2. Inventory turnover.

3. Accounts receivable turnover.

4. Earnings per share.

5. Profit margin on sales.

6. Return on assets on December 31, 2020.

b. Indicate for each of the following transactions whether the transaction would improve, weaken, or have no effect on the current ratio of Carver Inc. at December 31, 2020.

1. Write off an uncollectible account receivable, $2,200.

2. Purchase additional capital stock for cash.

3. Pay $40,000 on notes payable (short-term).

4. Collect $23,000 on accounts receivable.

5. Buy equipment on account.

6. Give an existing creditor a short-term note in settlement of account.

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Carver Inc. Balance Sheet December 31, 2020 $ 45,000 $ 50,000 32,000 Cash Notes payable (short-term) Accounts payable Receivables $110,000 5,000 260,000 Less: Allowance Accrued liabilities 15,000 95,000 Common stock (par $5) Retained earnings Inventory Prepaid insurance 170,000 141,000 8,000 Land 20,000 Equipment (net) 150,000 $488,000 $488,000 Carver Inc. Income Statement For the Year Ended December 31, 2020 Sales revenue $1,400,000 Cost of goods sold Inventory, Jan. 1, 2020 $200,000 Purchases 790,000 Cost of goods available for sale Inventory, Dec. 31, 2020 990,000 (170,000) Cost of goods sold 820,000 Gross profit on sales Operating expenses 580,000 170,000 Net income $ 410,000