Engineering Economic Analysis

552 ACCOUNTING AND ENGINEERINGECONOMY

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EEE Balance Sheet Data (thousands)

Cash $110,000

Securities 40,000

Accounts receivable 160,000

Retailers' inventories 250,000

Prepaid expenses 3,000

Accounts payable 351,000

Accumulated liabilities 89,000

18-16 For Magdalen Industries, compute the net income be-

fore taxes and net profit (or loss). Taxes for the year

were $1 million. Calculate the interest coverage and

net profit ratio. Is the interest coverage acceptable?

Explain why or why not.

Magdalen Industries Balance Sheet

Data (millions)

Revenues

Total operating revenue

(including sales of $48 million)

Total nonoperating revenue

Expenses.

Total operating expenses

Total nonoperating expenses

(interest payments)

$51

35

70

7

18-17 Find the net income ofThrbo Start given the following

data.

Turbo Start Balance Sheet

Data (thousands)

Accounts payable

Selling expense

Sales revenue

Owner's equity

Income taxes

Cost of goods sold

Accounts receivable

$ 1,000

5,000

50,000

4,500

2,000

30,000

15,000

(Answer: $13,000,000)

18-18 Thrbo Start (Problem 18-17) has current assets total-
ing $1.5 million (this includes $500,000 in current in-
ventory) and current liabilities totaling $50,000. Find
the current ratio and acid-test ratio. Are the ratios at
desirable levels? Explain.

18-19 For J & W Graphics Supply, compute the current ratio.

Is this a financially healthy company? Explain.

J&W Graphics Supply Balance

Sheet Data (thousands)

Assets

Cash

Inventories

Accountsreceivable

Bad debt provision

Liabilities

Notes payable

Accrued expenses

Accounts payable

$1740

900

2500

-75

500

125

1050

18-20 For Sutton Manufacturing, determine the current ratio

and the acid-test ratio. Are these values acceptable?

Why or why not?

Sutton Manufacturing Balance Sheet Data

(thousands)

Assets Liabilities

Current assets Current liabilities

Cash $870 Notes payable $500

Accounts (^450) Accountspayable 600
receivable
Inventory^1200 Accruals^200
Prepaid expenses^50 Taxespayable^30
Other expenses^10 Current portion^100

• long-termdebt -
  Total current assets 2670 Total current 1430
  liabilities
  Long-term debt^2000
  Officerdebt 200
  Net fixed assets (subordinated) -
  Land 1200 Total liabilities 3630
  Plant and 2800
  equipment
  Common stock^1670

Notes receivable (^200) Capital surplus^400
Intangibles^20 Retained earnings 1200
Other assets - 100 Total net worth^3270 -
Total assets 6900 Totalliabilities 6900
and net Worth
J
.