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Assignment1.docxAssignment 1
Question 1
1. Prepare an income statement for Franklin Kite Co. Take your calculations all the way to computing earnings per share. (Round EPS answer to 2 decimal places.)
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Sales |
$ |
1,380,000 |
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Shares outstanding |
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115,000 |
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Cost of goods sold |
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600,000 |
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Interest expense |
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28,000 |
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Selling and administrative expense |
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49,000 |
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Depreciation expense |
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31,000 |
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Preferred stock dividends |
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85,000 |
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Taxes |
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117,000 |
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Question 2
The Rogers Corporation has a gross profit of $792,000 and $277,000 in depreciation expense. The Evans Corporation also has $792,000 in gross profit, with $43,300 in depreciation expense. Selling and administrative expense is $188,000 for each company. |
a. Given that the tax rate is 40 percent, compute the cash flow for both companies.
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Rogers |
Evans |
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CashFlow |
$ |
$ |
b. Calculate the difference in cash flow between the two firms.
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Difference in Cash Flow |
$ |
Question 3
The Holtzman Corporation has assets of $441,000, current liabilities of $105,000, and long-term liabilities of $147,000. There is $31,500 in preferred stock outstanding; 20,000 shares of common stock have been issued.
a. Compute book value (net worth) per share. (Round your answer to 2 decimal places.)
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Book Value per share |
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b. If there is $32,700 in earnings available to common stockholders, and Holtzman’s stock has a P/E of 24 times earnings per share, what is the current price of the stock? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
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Current Price |
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c. What is the ratio of market value per share to book value per share? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
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Market value to book Value |
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Times |
Question 4
Refer to the following financial statements for Crosby Corporation:
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CROSBY CORPORATION Income Statement For the Year Ended December 31, 20X2 |
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Sales |
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$ |
4,240,000 |
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Cost of goods sold |
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2,640,000 |
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Gross profit |
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$ |
1,600,000 |
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Selling and administrative expense |
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700,000 |
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Depreciation expense |
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300,000 |
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Operating income |
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$ |
600,000 |
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Interest expense |
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89,000 |
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Earnings before taxes |
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$ |
511,000 |
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Taxes |
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211,000 |
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Earnings after taxes |
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$ |
300,000 |
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Preferred stock dividends |
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10,000 |
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Earnings available to common stockholders |
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$ |
290,000 |
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Shares outstanding |
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150,000 |
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Earnings per share |
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$ |
1.93 |
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Statement of Retained Earnings For the Year Ended December 31, 20X2 |
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Retained earnings, balance, January 1, 20X2 |
$ |
80,300 |
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Add: Earnings available to common stockholders, 20X2 |
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290,000 |
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Deduct: Cash dividends declared and paid in 20X2 |
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150,000 |
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Retained earnings, balance, December 31, 20X2 |
$ |
220,300 |
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Comparative Balance Sheets For 20X1 and 20X2 |
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Year-End 20X1 |
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Year-End 20X2 |
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Assets |
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Current assets: |
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Cash |
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$ |
112,000 |
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$ |
185,900 |
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Accounts receivable (net) |
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556,000 |
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602,000 |
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Inventory |
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633,000 |
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641,000 |
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Prepaid expenses |
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64,900 |
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32,000 |
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Total current assets |
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$ |
1,365,900 |
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$ |
1,460,900 |
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Investments (long-term securities) |
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92,300 |
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85,000 |
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Gross plant and equipment |
$ 2,120,000 |
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$ 2,870,000 |
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Less: Accumulated depreciation |
1,870,000 |
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2,170,000 |
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Net plant and equipment |
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250,000 |
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700,000 |
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Total assets |
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$ |
1,708,200 |
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$ |
2,245,900 |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
304,000 |
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$ |
635,000 |
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Notes payable |
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536,000 |
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536,000 |
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Accrued expenses |
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74,900 |
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56,600 |
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Total current liabilities |
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$ |
914,900 |
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$ |
1,227,600 |
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Long-term liabilities: |
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Bonds payable, 20X2 |
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123,000 |
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208,000 |
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Total liabilities |
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$ |
1,037,900 |
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$ |
1,435,600 |
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Stockholders’ equity: |
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Preferred stock, $100 par value |
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$ |
90,000 |
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$ |
90,000 |
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Common stock, $1 par value |
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150,000 |
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150,000 |
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Capital paid in excess of par |
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350,000 |
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350,000 |
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Retained earnings |
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80,300 |
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220,300 |
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Total stockholders’ equity |
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$ |
670,300 |
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$ |
810,300 |
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Total liabilities and stockholders’ equity |
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$ |
1,708,200 |
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$ |
2,245,900 |
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a. Prepare a statement of cash flows for the Crosby Corporation: (Amounts to be deducted should be indicated with parentheses or a minus sign.)
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b. Compute the book value per common share for both 20X1 and 20X2 for the Crosby Corporation. (Round your answers to 2 decimals places.)
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Question 5
Jim Short’s Company makes clothing for schools. Sales in 20X1 were $4,490,000. Assets were as follows:
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Cash |
$ |
110,000 |
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Accounts receivable |
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864,000 |
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Inventory |
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493,000 |
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Net plant and equipment |
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504,000 |
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Total assets |
$ |
1,971,000 |
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a. Compute the following: (Round your answers to 2 decimal places.)
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Turn over Ratio |
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1 |
Account receivable turnover |
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Times |
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2 |
Inventory Turnover |
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Times |
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3 |
Fix Asset Turnerover |
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Times |
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4 |
Total Asset turnover |
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Times |
c. Is there an improvement or a decline in the total asset turnover?
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Decline
·
Improvement
The balance sheet for Stud Clothiers is shown next. Sales for the year were $3,490,000, with 75 percent of sales sold on credit.
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STUD CLOTHIERS Balance Sheet 20X1 |
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Assets |
Liabilities and Equity |
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Cash |
$ |
38,000 |
Accounts payable |
$ |
262,000 |
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Accounts receivable |
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292,000 |
Accrued taxes |
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148,000 |
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Inventory |
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248,000 |
Bonds payable (long-term) |
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178,000 |
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Plant and equipment |
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500,000 |
Common stock |
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100,000 |
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Paid-in capital |
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150,000 |
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Retained earnings |
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240,000 |
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Total assets |
$ |
1,078,000 |
Total liabilities and equity |
$ |
1,078,000 |
Compute the following ratios: (Use a 360-day year. Do not round intermediate calculations. Round your answers to 2 decimal places. Input your debt-to-total assets answer as a percent rounded to 2 decimal places.)
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a |
Current ratio |
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Times |
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b |
Quick Ratio |
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times |
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c |
Debt-to-total-asset ratio |
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% |
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d |
Asset turnover |
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times |
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e |
Average collection period |
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days |
Question 7
Jolie Foster Care Homes Inc. shows the following data:
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Years Net income Total Assets Stockholders' Equity Total Debt’s |
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20X1 |
138,000 |
2,650,000 |
796,000 |
1,854,000 |
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20X2 |
140,000 |
2,300,000 |
1,280,000 |
1,016,000 |
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20X3 |
160,000 |
2,280,000 |
1,500,000 |
780,000 |
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20X4 |
255,000 |
2,640,000 |
2,510,000 |
130,000 |
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a-1. Compute the ratio of net income to total assets for each year. (Input your answers as a percent rounded to 2 decimal places.)
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Year |
Return on Assets |
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20X1 |
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% |
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20X2 |
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% |
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20X3 |
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% |
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20X4 |
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% |
a-2. What is the trend in the net income to total assets ratio?
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Strong downward movement
·
Strong upward movement
b-1. Compute the ratio of net income to stockholders' equity for each year. (Input your answers as a percent rounded to 2 decimal places.)
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Year |
Return Stockholder’s Equity |
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20X1 |
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% |
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20X2 |
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% |
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20X3 |
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% |
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20X4 |
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% |
b-2. What is the trend in the net income to stockholders' equity ratio?
·
Strong downward movement
·
Strong upward movement
