Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

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Bruno Company has decided to expand its operations. The bookkeeper recently completed the balance sheet presented below in order to obtain additional funds for expansion.

BRUNO COMPANY
BALANCE SHEET
DECEMBER 31, 2012
Current assets
  Cash $261,870
  Accounts receivable (net) 341,870
  Inventories (lower-of-average-cost-or-market) 402,870
  Equity investments (trading)—at cost (fair value $121,510) 141,510
Property, plant, and equipment
  Buildings (net) 571,510
  Equipment (net) 161,510
  Land held for future use 176,510
Intangible assets
  Goodwill 81,870
  Cash surrender value of life insurance 91,870
  Prepaid expenses 13,870
Current liabilities
  Accounts payable 136,510
  Notes payable (due next year) 126,870
  Pension obligation 83,510
  Rent payable 50,870
  Premium on bonds payable 54,870
Long-term liabilities
  Bonds payable 501,510
Stockholders’ equity
  Common stock, $1.00 par, authorized 400,000 shares, issued 291,870 291,870
  Additional paid-in capital 181,870
  Retained earnings  ?

Prepare a revised balance sheet given the available information. Assume that the accumulated depreciation balance for the buildings is $161,870 and for the office equipment, $106,870. The allowance for doubtful accounts has a balance of $18,870. The pension obligation is considered a long-term liability. (List current assets in order of liquidity. List property plant and equipment in order of buildings and equipment.)

BRUNO COMPANY
Balance Sheet
December 31, 2012
Assets
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$0312156_0_28170127659485167_dropdown_3401_resp_11
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0312156_0_28170127659485167_dropdown_3561_resp_6
0312156_0_28170127659485167_dropdown_3631_resp_2:  : 
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2. Introduction of a new product line.
3. Loss of assembly plant due to fire.
4. Sale of a significant portion of the company’s assets.
5. Retirement of the company president.
6. Issuance of a significant number of shares of common stock.
7. Loss of a significant customer.
8. Prolonged employee strike.
9. Material loss on a year-end receivable because of a customer’s bankruptcy.
10. Hiring of a new president.
11. Settlement of prior year’s litigation against the company.
12. Merger with another company of comparable size.
Warning
 
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Question #5

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As loan analyst for Madison Bank, you have been presented the following information.

Plunkett Co.
Herring Co.
Assets
Cash $113,700 $321,800
Receivables 229,300 302,600
Inventories 564,300 512,700
   Total current assets 907,300 1,137,100
Other assets 500,500 613,000
   Total assets $1,407,800 $1,750,100
Liabilities and Stockholders’ Equity
Current liabilities $306,700 $349,700
Long-term liabilities 396,400 500,500
Capital stock and retained earnings 704,700 899,900
   Total liabilities and stockholders’ equity $1,407,800 $1,750,100
Annual sales $933,500 $1,495,700
Rate of gross profit on sales 25 % 40 %

Each of these companies has requested a loan of $49,510 for 6 months with no collateral offered. In as much as your bank has reached its quota for loans of this type, only one of these requests is to be granted.
Compute the various ratios for each company. (Round answer to 2 decimal places, e.g. 2.25.)

Plunkett Co.
Herring Co.
Current ratio
[removed]
 : 1
[removed]
 : 1
Acid-test ratio
[removed]
 : 1
[removed]
 : 1
Accounts receivable turnover
[removed]
 times
[removed]
 times
Inventory turnover
[removed]
 times
[removed]
 times
Cash to current liabilities
[removed]
 : 1
[removed]
 : 1

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