Assignment
1. Financial statements for Grange Company appear below:
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Grange Company
Comparative Balance Sheet
December 31, 20X1 and 20X0
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20X1
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20X0
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Current assets:
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Cash and marketable securities
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$180,000
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$160,000
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Accounts receivable, net
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150,000
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120,000
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Inventory
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100,000
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100,000
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Prepaid expenses
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40,000
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50,000
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Total current assets
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470,000
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430,000
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Noncurrent assets:
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Plant & equipment, net
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1,390,000
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1,320,000
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Total assets
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$1,860,000
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$1,750,000
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Current liabilities:
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Accounts payable
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$130,000
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$130,000
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Accrued liabilities
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60,000
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80,000
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Notes payable, short term
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100,000
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100,000
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Total current liabilities
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290,000
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310,000
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Noncurrent liabilities:
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Bonds payable
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270,000
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300,000
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Total liabilities
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560,000
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610,000
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Stockholders' equity:
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Preferred stock, $5 par, 5%
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100,000
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100,000
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Common stock, $5 par
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220,000
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220,000
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Additional paid-in capital--common stock
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190,000
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190,000
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Retained earnings
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790,000
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630,000
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Total stockholders' equity
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1,300,000
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1,140,000
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Total liabilities & stockholders' equity
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$1,860,000
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$1,750,000
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2.
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Grange Company
Income Statement
For the Year Ended December 31, 20X1
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Sales (all on account)
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$2,400,000
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Cost of goods sold
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1,680,000
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Gross margin
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720,000
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Operating expenses
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280,000
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Net operating income
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440,000
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Interest expense
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30,000
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Net income before taxes
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410,000
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Income taxes (30%)
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123,000
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Net income
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$287,000
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3. Dividends during 20X1 totaled $127,000, of which $5,000 were preferred dividends.The market price of a share of common stock on December 31, 20X1, was $100.
Required: Compute the following leverage ratios for 20X1. Round your answers to two decimal places.
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A. Times-interest-earned ratio
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times
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B. Debt ratio
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to 1
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C. Debt-to-equity ratio
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to 1
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