Question

Have I answered this question correctly? If not what is the correct answer and why.Calculate the equity

ratio based on the following information: cash = $14,870; accounts receivable = $22,108; prepaid $3,010; supplies = $927; equipment = $62,150; accumulated depreciation = 13,750; accounts payable = 28,000. Round to two decimal places.

The Answer is: 68.65% or 0.68  

The formula for Equity Ratio is:

Equity Ratio = Total Equity

                          Total Assits

Cash$14,870
Accounts Receivable $22,108

Supplies$     927

Prepaid$ 3,010

Equipment$62,150

Accum Deprecation   ($13,750)                         

Total  Assets$89,315

Accounts Payable $28,000

Total Liabilities$28,000

Assets – Liabilities = Equity

$89,315 – $28,000  = $61,315

Equity Ratio = Total Equity $61,315

                          Total Assets $89,315   = 0.6865028 x 100 – 68.65028 % rounded to 68.65%

 

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Question

  UnitsDollars  April (actual)8,000      $1,440,000     May (actual)2,800      504,000     June (budgeted)7,500      1,350,000     July (budgeted)7,500      1,350,000     August (budgeted)4,100      738,000   
 All sales are on credit. Recent experience shows that 26% of credit sales is collected in the month of the sale, 44% in the month after the sale, 26% in the second month after the sale, and 4% proves to be uncollectible. The product’s purchase price is $110 per unit. All purchases are payable within 11 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 21% of the next month’s unit sales plus a safety stock of 75 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,416,000 and are paid evenly throughout the year in cash. The company’s minimum cash balance at month-end is $110,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $110,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $31,000, and the company’s cash balance is $110,000. (Round final answers to the nearest whole dollar.)Required:
Prepare a table that shows the computation of cash collections of its credit sales (accounts receivable) in each of the months of June and July.Prepare a table that shows the computation of budgeted ending inventories (in units) for April, May, June, and July.Aztec Company sells its product for $180 per unit. Its actual and projected sales follow.

 

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