Case Accounting Solution

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GENMO CORPORATION
Balance Sheet as of December 31, 2011

Line| Assets| | |
1.| Cash and marketable securities| | $ 416|
2.| Accounts receivable| | 1,117|
3.| Subtotal: quick assets| | 1,533|
4.| Inventories| | 872|
5.| Prepaid expenses| | 273|
6.| Total current assets| | 2,678|
7.| Noncurrent assets| | 4,524|
8.| Total assets| | $7,202|
| Liabilities and Equity| | |
9.| Current liabilities| | $2,285|
10.| Noncurrent liabilities| $1,885| |
11.| Shareholders’ equity| 3,032| |
12.| Total invested capital| | 4,917|
13.| Total liabilities and shareholders’ equity| | $7,202| | | | |
GENMO CORPORATIONIncome StatementFor the Year Ending Dec 31, 2011| 14.| Revenues| | $10,281|
15.| Cost of sales| | 8,727|
16.| Gross margin| | 1,554|
17.| Other expense| | 1,263|
18.| Net Income| | $ 291|

Line| |
1.| Line 3 - line 2|
2.| Revenue (10,281) * days’ receivables (39.66) / 365| 3.| Current liabilities (2,285) * quick ratio (0.671)| 4.| Cost of sales (line 15) inventory turnover (10.005)| 5.| Line 6 - (line 3 + line 4)|

6.| Current liabilities (2,285) * current ratio (1.172)| 7.| Line 8 - line 6|
8.| Same as line 13|
9.| Given|
10.| Let debt = X; then X (4,917 - X) = 0.6215 (debt/equity). Solving, X = 1,885. (The 4,917 comes from line 12.)| 11.| Line 12 - line 10|
12.| Revenues (10,281) / invested capital turnover (2.091)| 13.| Line 9 + line 12|
14.| Given|
15.| Line 14 - line 16|
16.| Revenues (10,281) * gross margin percentage (0.1512)| 17.| Line 16- line 18|
18.| Revenue (10,281)* profit margin percentage (0.02831)|
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