Week 5

Saturday, April 8 (12:01 a.m.) to Friday, April 14 (11:59 p.m.)

Topics to research and review:

 Balance Sheet—Liabilities o Chapters 35-41 o Current Liabilities o Accounts Payable, Accrued Expenses, and Other Current Liabilities o Short-term Debt o Long-term Debt Coming Due o Total Current Liabilities and the Current Ratio o Long-term Debt o Deferred Income Tax, Minority Interest, and Other Liabilities

Assignments, Due Dates, and Points

 Bi-Weekly Assignment 3 o Due by 11:59 pm on Friday, April 14. o Submit your file in Word in the correct Dropbox. o 25 points

 Discussion 3 o Original comment on the topic must be posted by 11:59 pm on Tuesday, April 11. Replies to a

minimum of two other students’ original posts or to other students’ replies must be posted by 11:59 pm on Friday, April 14.

o 25 points

 Research Project Part 4 o Due by 11:59 pm on Friday, April 14. o 5 points

Bi-Weekly Assignment 3 Requirement

 Read Chapters 35 through 41.

 Answer the following questions. On your file put the question first (by number and in bold) and then answer the question in full.

Presented below is information related to Washington, Inc.

Washington, Inc.

Balance Sheet

December 31, 2025

Cash $ 45,000 Notes Payable (short-term) $ 50,000

Accounts Receivable, net 95,000 Accounts Payable 32,000

Inventory 170,000 Accrued Liabilities 5,000

Prepaid Insurance 8,000 Common Stock, $5 par 260,000

Land 20,000 Retained Earnings 141,000

Equipment, net 150,000

$ 488,000 $ 488,000

Washington, Inc.

Income Statement

For the Year Ended December 31, 2025

Sales Revenue $ 1,400,000

Cost of Goods Sold

Inventory, January 1, 2025 $ 200,000

Purchases 790,000

Cost of Goods Available for Sale 990,000

Inventory, December 31, 2025 (170,000)

Cost of Goods Sold 820,000

Gross Profit on Sales 580,000

Operating Expenses 170,000

Net Income $ 410,000

Compute the following ratios or relationships of Washington, 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, 2025.

Indicate for each of the following transactions whether the transaction would improve, weaken, or have no

effect on the current ratio of Washington, Inc. at December 31, 2025.

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.

Discussion 3 Requirement

 Address the following question:

The following ratios are for four companies in four different industries for 2016.

Ratio Company 1 Company2 Company3 Company4

Current Assets/Total Assets 7% 18% 31% 19%

Average Days to Sell Inventory 72 days 12 days 163 days 108 days

Average Days to Collect Receivables 60 days 3 days 47 days 9 days

Return on Assets 7% 8% 3% 5%

Gross Margin 39% 22% 22% 50%

Sales/PPE 1.1 times 3.4 times 4.5 times 23.5 times

Sales/Number of Full-Time Employees $279,980 $46,350 $397,743 $64,717

The four companies to which these ratios relate are:

1. Molson Coors Brewing Company 2. Darden Restaurants, Inc. 3. Deere & Co. 4. Weight Watchers International, Inc.

Discuss which company should be matched with each set of ratios. Explain in detail you choices. (Do not

cheat and look them up!)

Research Project Part 4:

 Using the Balance Sheet and Notes for your company, answer the questions below:

1. What are the total current assets? What is the current ratio?

2. What is the amount of “cash and cash equivalents”? What percentage is “cash and cash equivalents” of total current assets? Is this an unusually large or small percentage? Explain

3. What are the net receivables? What is the percentage of net receivables to gross sales? Which of your companies is lower?

4. What is the total amount of intangible assets? What amount is in Goodwill?

5. What depreciation method is being used for property, plant, & equipment (PPE)? Is the same method used for all PPE?

6. How much do the companies have in long-term investments? Are these investments in debt or equity?

7. Calculate return on assets. What does this mean?

8. What is the amount of total current liabilities? How much of this is in short-term debt? In long-term debt coming due?

9. Look at the current ratio again. What affect can changes in current liabilities have on the current ratio?

10. What is the amount of long-term debt?

11. What is the amount of deferred taxes?

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