Presented here are an incomplete income statement and balance sheet for Schwenke Corporation. SCHWENKE CORPORATION Income Statement

Question:

Presented here are an incomplete income statement and balance sheet for Schwenke Corporation.

SCHWENKE CORPORATION

Income Statement

Year Ended December 31, 2014

Net sales ............................................ $.......... (a)

Cost of goods sold .......................................... (b)

Gross profit .................................................. (c)

Operating expenses .............................. 333,750

Profit from operations ..................................... (d)

Interest expense ........................................ 10,500

Profit before income taxes ................................. (e)

Income tax expense ......................................... (f)

Profit ................................................. $124,600

SCHWENKE CORPORATION

Balance Sheet

December 31, 2014

Assets

Current assets

Cash .................................................... $ 7,500

Accounts receivable ......................................... (g)

Inventory ...................................................... (h)

Total current assets ........................................... (i)

Property, plant, and equipment ........................... (j)

Total assets .................................................... $ (k)

Liabilities

Current liabilities .......................................... $ (l)

Non-current liabilities ................................ 120,000

Total liabilities ............................................... (m)

Shareholders' Equity

Common shares ...................................... 250,000

Retained earnings .................................... 400,000

Total shareholders' equity .......................... 650,000

Total liabilities and shareholders' equity ............. $ (n)

Additional information:

1. The gross profit margin is 40%.

2. The income tax rate is 20%.

3. The inventory turnover is 8 times.

4. The current ratio is 3:1.

5. The asset turnover is 1.5 times.

Instructions

Calculate the missing information using the ratios. Use ending balances instead of average balances, where averages are required for ratio calculations. Show your calculations?

Taking It Further

Why is it not possible to calculate the missing amounts in the same sequence (i.e., a, b, c, etc.) that they are presented above?

Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...