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Chapter 17 Homework

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The 2020 financial statements of Outdoor Waterworks Inc. follow:

Outdoor Waterworks Inc.
Income Statement
For Year Ended December 31, 2020
Net sales	$	1,166,000
Cost of goods sold:
Inventory, Dec. 31, 2019	$	85,360
Purchases		620,840
Goods available for sale	$	706,200
Inventory, Dec. 31, 2020		62,040
Cost of goods sold		644,160
Gross profit from sales	$	521,840
Operating expenses		293,360
Operating profit	$	228,480
Interest expense		13,400
Profit before taxes	$	215,080
Income taxes		19,864
Profit	$	195,216

Outdoor Waterworks Inc.
Balance Sheet
December 31, 2020
Assets
Cash	$	24,200
Current non-strategic investments		26,880
Accounts receivable, net		54,080
Notes receivable		12,560
Inventory		62,040
Prepaid expenses		6,160
Plant and equipment, net		336,520
Total assets	$	522,440
Liabilities and Equity
Accounts payable	$	49,640
Accrued wages payable		6,640
Income taxes payable		7,560
Long-term note payable, secured by mortgage on plant		120,000
Common shares, 160,000 shares		202,000
Retained earnings		136,600
Total liabilities and equity	$	522,440

Assume all sales were on credit. Also assume the long-term note payable is due in 2023, with no current portion. On the December 31, 2019, balance sheet, the assets totalled $442,720, common shares were $202,000, and retained earnings were $113,640. Required: Calculate the following: (Use 365 days in a year. Do not round your intermediate calculations. Round the answers to 2 decimal places.)

Analysis Component: Identify whether the ratios calculated above are favourable or unfavourable to the industry averages.

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