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 StatementsFinancial 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...
Step by Step Answer:
Managerial Accounting
ISBN: 978-1259307416
16th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer