Balances extracted from the Statement of Financial Position as at 31 December:20202019RPlant and equipment3 750 0003 000 000Investments210 000240 000Inventories1 290 0001 230 000Accounts receivable1140 0001 050 000Cash and cash equivalents300 000210 000Ordinary share capital1 860 0001 860 000Retained eamings1 800 0001 500 000Long-term loan360 000210 000Accounts payable2 520 0001 962 000Dividends payable120 000150 000Income tax payable30 00048 000Note:(a)Plant and equipment was purchased but there was no disposal.(b)The number of ordinary shares in issue was 930 000.(c)All purchases and sales of inventory were on credit.(d)Credit terms to debtors are 30 days. Debtors took approximately 28 days to settle their accounts during 2019.4.1Calculate the following ratios for 2021. Express answers to two decimal places.4.1.1Gross margin4.1.2Inventory turnover4.1.3Acid test ratio4.1.4Debt to equity4.1.5Earnings per share4.2Are the collections from credit sales satisfactory? Motivate your answer by using the relevant ratio.4.3Would the shareholders of Harmony Limited be satisfied with the return on their investments?Motivate your answer with the use of a relevant ratio.4.4Suggest THREE (3) ways in which Harmony Limited can improve its gross margin ratio, withoutincreasing the selling price of the inventories. Use the information provided to answer the questions that follows below:Extract of Statement of Changes in Equity for the year ended 31 December 2020RetainedearningsRBalance on 01 January 20201500 000Profit after tax480 000Dividends paid and proposed in 2020(180 000)Balance on 31 December 20201 800 000INFORMATIONThe information provided below was extracted from the accounting records of Harmony Limited on 31 December 2020:Harmony LimitedExtract of Statement of Comprehensive Income for the year ended 31 December 2020Sales6 600 000Cost of sales(3 900 000)Gross profit2 700 000Operating expenses(1710 000)Selling and administrative expenses1 260 000Depreciation450 000Operating profit990 000Interest expense(270 000)Profit before tax720 000Company tax(240 000)Profit after tax480 000

Solution:- Calculation of ratios as follows under:- 4.1.1)Gross margin ratio =Gross profit/Sales x…

Answered: 4.1 Calculate the following ratios for…

4.1 Calculate the following ratios for 2021. Express answers to two decimal places. 4.1.1 Gross margin 4.1.2 Inventory turnover

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 6E: Balance Sheet Baggett Companys balance sheet accounts and amounts as of December 31, 2019, are shown...

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