MILESTONE ONE

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Trial Balance

Chester, Inc.
Trial Balances for years ending December 31, 2013, 2014 and 2015
Account Description 2013 2014 2015
Cash on Hand $2,483 $2,459 $2,511
Checking Account - Operating 247,646 252,858 243,892
MMKT Accounts 806,288 983,161 1,205,563
Investments - Trading 6,935,712 6,850,198 6,978,923
Accounts Receivable 20,513,628 56,472,091 49,042,528
Allowance for Doubtful Accounts (1,578,525) (2,387,691) (2,942,552)
Other Receivables 0 1,400,000 1,200,000
Inventory 23,531,507 75,351,471 65,990,780
Reserve for Inventory Obsolescence (3,765,000) (12,136,103) (10,558,525)
Prepaid Insurance 1,829,143 2,830,474 2,667,722
Prepaid Rent 250,000 - 0 - 0
Office Supplies 9,259 9,565 9,182
Land 146,250 131,040 131,040
Buildings and Land Improvements 779,882 698,775 833,775
Machinery, Equipment, Office Furniture 541,522 3,280,589 3,280,589
Accum. Depreciation (205,000) (786,102) (1,403,257)
Other Noncurrent Assets 67,301 - 0 - 0
Accounts Payable (8,934,591) (19,488,866) (12,850,648)
Wages Payable (36,838) (264,513) (198,384)
FICA Employee Withholding (1,648) (9,452) (7,089)
Medicare Withholding (730) (12,785) (9,589)
Federal Payroll Taxes Payable (7,541) (132,256) (99,192)
State Payroll Taxes Payable (3,519) (61,630) (46,200)
FICA Employer Withholding (1,648) (9,452) (7,089)
Medicare Employer Withholding (730) (12,785) (9,589)
Income Taxes Receivable/Payable 0 (3,205,440) (6,011,540)
Line of Credit (12,500,000) (52,231,360) (47,481,737)
Current Portion LT Note Payable 0 (677,640) (721,480)
Interest payable 0 (470,311) (568,429)
Bonuses payable 0 (504,000) (459,000)
Dividend payable (6,000,000) (15,250,000) (15,000,000)
Long-Term Note Payable (12,762,360) (12,040,880)
Common Stock (10,131,250) (10,131,250) (10,131,250)
Paid-in Capital (9,278,750) (9,278,750) (9,278,750)
Retained Earnings (Beginning Balance) (2,773,900)
Dividends 6,000,000 15,250,000 15,000,000
Sales (307,716,148) (271,839,067) (288,876,206)
Sales Returns 5,621,979 12,432,247 23,110,096
Income from Investments (665,079) (658,672) (549,387)
Unrealized (Gains) and Losses - Investments 64,288 85,514 (128,725)
Interest Income (255,379) (147,707) (142,168)
Cost of Goods Sold 176,961,437 161,029,981 179,103,248
Administrative Wages Expense 21,094,132 18,344,399 19,706,506
Advertising Expense 1,121,425 1,161,276 1,058,391
Auto Expenses 261,218 235,763 214,001
Bad Debt Expense 2,028,032 5,875,403 13,900,800
Bonus Expense 0 504,000 459,000
Depreciation Expense 166,250 581,102 617,155
Freight 5,378,689 4,749,095 4,325,068
Insurance Expense 1,067,428 1,045,085 951,774
Legal and Professional Expense 4,506,417 11,037,039 8,987,069
Maintenance Expense 76,420 96,020 87,641
Miscellaneous Office Expense 21,279 27,803 25,390
Payroll Tax Expense 1,938,736 1,767,149 1,609,342
Pension/Profit-Sharing Plan Ex 3,750,000 3,696,000 3,366,000
Phone 95,467 57,911 53,651
Postal 160,042 87,140 79,360
Property Tax Expense 100,619 110,252 101,319
Rent or Lease Expense 3,254,357 1,370,273 2,230,615
Research and Development 38,639,554 532,425 3,080,313
Utilities 169,554 170,765 155,600
Warehouse Salaries 5,791,730 5,848,120 5,270,689
Warranty Expense 1,375,352 1,297,104 1,422,381
Interest Expense 1,093,750 3,373,056 2,942,147
Income Tax Expense - Federal 2,956,250 14,142,240 7,269,540
Income Tax Expense - State 536,250 2,503,200 1,258,000
Loss on Legal Settlement 23,965,000 - 0 - 0

Income Statement

Use this worksheet to prepare a Multi-step Income Statement to include EPS
Chester, Inc.
2013 2014 2015
Sales 307,716,148 271,839,067 288,876,206
Sales Returns 5,621,979 12,432,247 23,110,096
Net Sales 302,094,169 259,406,820 265,766,110
Cost of Goods Sold 176,961,437 161,029,981 179,103,248
Gross Profit 125,132,732 98,376,839 86,662,862
Operating Expense
Administrative Wages Expense 21,094,132 18,344,399 19,706,506
Advertising Expense 1,121,425 1,161,276 1,058,391
Auto Expenses 261,218 235,763 214,001
Bad Debt Expense 2,028,032 5,875,403 13,900,800
Bonus Expense 0 504,000 459,000
Depreciation Expense 166,250 581,102 617,155
Freight 5,378,689 4,749,095 4,325,068
Insurance Expense 1,067,428 1,045,085 951,774
Legal and Professional Expense 4,506,417 11,037,039 8,987,069
Maintenance Expense 76,420 96,020 87,641
Miscellaneous Office Expense 21,279 27,803 25,390
Payroll Tax Expense 1,938,736 1,767,149 1,609,342
Pension/Profit-Sharing Plan Ex 3,750,000 3,696,000 3,366,000
Phone 95,467 57,911 53,651
Postal 160,042 87,140 79,360
Property Tax Expense 100,619 110,252 101,319
Rent or Lease Expense 3,254,357 1,370,273 2,230,615
Research and Development 38,639,554 532,425 3,080,313
Utilities 169,554 170,765 155,600
Warehouse Salaries 5,791,730 5,848,120 5,270,689
Warranty Expense 1,375,352 1,297,104 1,422,381
Total Operating Expenses 90,996,701 58,594,124 67,702,065
Income Before Other Gains and Losses 34,136,031 39,782,715 18,960,797
Other Gains and Losses
Interest Expense 1,093,750 3,373,056 2,942,147
Income from Investments (665,079) (658,672) (549,387)
Unrealized (Gains) and Losses - Investments 64,288 85,514 (128,725)
Interest Income (255,379) (147,707) (142,168)
Total Other Gains and Losses 237,580 2,652,191 2,121,867
Income before Income tax 33,898,451 37,130,524 16,838,930
Income tax expenses
Income Tax Expense - Federal 2,956,250 14,142,240 7,269,540
Income Tax Expense - State 536,250 2,503,200 1,258,000
Net Income 30,405,951 20,485,084 8,311,390
Loss on Legal Settlement 23,965,000 0 0
Income transferred to Retained earnings 6,440,951 20,485,084 8,311,390
Number of Shares in common stock 875,000 875,000 875,000
Earnings per share $34.75 $23.41 $9.50
Check Figures:
2015 Net Income $ 8,311,390 $ -
2014 Gross Profit $ 98,376,839 $ -
2013 Total Expenses $ 90,996,701 $ -
Chester, Inc.
Income Statement
Year Ended December 31,
Account Descripation 2013 2014 2015
Sales Revenue
Sales 307,716,148 271,839,067 288,876,206
Less: Sales Return 5,621,979 12,432,247 23,110,096
Net Sales 302,094,169 259,406,820 265,766,110
Cost of Goods Sold 176,961,437 161,029,981 179,103,248
Gross Profit 125,132,732 98,376,839 86,662,862
Selling & Admin Expenses 90,996,701 58,594,124 67,702,065
Income from Operations 34,136,031 39,782,715 18,960,797
Other Income and expense
Income from Investments (600,791) (573,158) (678,112)
Interest Income (255,379) (147,707) (142,168)
Interest Expense 1,093,750 3,373,056 2,942,147
Loss on Legal Settlement 23,965,000
Income before Income tax 9,933,451 37,130,524 16,838,930
Income Tax Expense - Federal 2,956,250 14,142,240 7,269,540
Income Tax Expense - State 536,250 2,503,200 1,258,000
Net Income 6,440,951 20,485,084 8,311,390
Number of shares 875,000 875,000 875,000
Earnings per share $7.36 $23.41 $9.50
Check Figures:
2015 Net Income $ 8,311,390
2014 Gross Profit $ 98,376,839
2013 Total Expenses $ 90,996,701

Statement of Retained Earnings

Use this worksheet to complete a Statement of Retained Earnings
Chester, Inc.
2013 2014 2015
Common Stock 10131250 10131250 10131250
Paid-in Capital 9278750 9278750 9278750
Retained Earnings (Beginning Balance) 2773900 3214851 8449935
Add: Net Income 6,440,951 20,485,084 8,311,390
28,624,851 43,109,935 36,171,325
Less: Dividend paid 6,000,000 15,250,000 15,000,000
Balance - Ending 22,624,851 27,859,935 21,171,325
Check Figures:
2015 Shareholders' Equity $ 21,171,325
2014 Shareholders' Equity $ 27,859,935
2013 Shareholders' Equity $ 22,624,851
Chester, Inc.
Staement of Retained Earnings
Balance - January 1, 2013 $2,773,900
Add: Net Income $6,440,951
$9,214,851
Less: Cash Dividends $6,000,000
Balance - December 31, 2013 $3,214,851
Add: Net Income $20,485,084
$23,699,935
Less: Cash Dividends $15,250,000
Balance - December 31, 2014 $8,449,935
Add: Net Income $8,311,390
$16,761,325
Less: Cash Dividends $15,000,000
Balance - December 31, 2015 $1,761,325
Check Figures:
2015 Shareholders' Equity $ 21,171,325
2014 Shareholders' Equity $ 27,859,935
2013 Shareholders' Equity $ 22,624,851

Balance Sheet

Use this worksheet to complete a Classified Balance Sheet
Chester, Inc.
2013 2014 2015
Assets
Current Assets
Cash on Hand 2483 2459 2511
Checking Account - Operating 247646 252858 243892
MMKT Accounts 806288 983161 1205563
Investments - Trading 6935712 6850198 6978923
Accounts Receivable 20513628 56472091 49042528
Allowance for Doubtful Accounts -1578525 -2387691 -2942552
Other Receivables 0 1400000 1200000
Inventory 23531507 75351471 65990780
Reserve for Inventory Obsolescence -3765000 -12136103 -10558525
Prepaid Insurance 1829143 2830474 2667722
Prepaid Rent 250000 0 0
Office Supplies 9259 9565 9182
Total Current Assets 48782141 129628483 113840024
Property, Plant & Equipment
Land 146250 131040 131040
Buildings and Land Improvements 779882 698775 833775
Machinery, Equipment, Office Furniture 541522 3280589 3280589
Accum. Depreciation -205000 -786102 -1403257
Other Noncurrent Assets 67301 0 0
Total Property, Plant & Equipment 1329955 3324302 2842147
Total Assets 50112096 132952785 116682171
Liabilities and Stockholder's Equity
2013 2014 2015
Accounts Payable 8,934,591 19,488,866 12,850,648
Wages Payable 36,838 264,513 198,384
FICA Employee Withholding 1,648 9,452 7,089
Medicare Withholding 730 12,785 9,589
Federal Payroll Taxes Payable 7,541 132,256 99,192
State Payroll Taxes Payable 3,519 61,630 46,200
FICA Employer Withholding 1,648 9,452 7,089
Medicare Employer Withholding 730 12,785 9,589
Income Taxes Receivable/Payable 0 3,205,440 6,011,540
Line of Credit 12,500,000 52,231,360 47,481,737
Current Portion LT Note Payable 0 677,640 721,480
Interest payable 0 470,311 568,429
Bonuses payable 0 504,000 459,000
Dividend payable 6,000,000 15,250,000 15,000,000
Total Current Liabilities 27487245 92330490 83469966
Long term Liabilities
Long-Term Note Payable 0 12,762,360 12,040,880
Total Liabilities 27,487,245 105,092,850 95,510,846
Stockholder's Equity
Common Stock 10,131,250 10,131,250 10,131,250
Paid-in Capital 9,278,750 9,278,750 9,278,750
Retained Earnings (Beginning Balance) 3,214,851 8,449,935 1,761,325
Total Stockholder's Equity 22,624,851 27,859,935 21,171,325
Total Liabilities and Stockholder's Equity 50,112,096 132,952,785 116,682,171
0 0 0
Check Figures:
2015 Total Current Assets $ 113,840,024 $ -
2014 Current Liabilities $ 92,330,490 $ -
2013 Total Assets $ 50,112,096 $ -

Statement of Cash Flows

Use this Worksheet to complete a Statement of Cash Flows
Chester, Inc.
2013 2014 2015
Cash Flow from Operating Activities
Net Income 30,405,951 20,485,084 8,311,390
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation Expense 166,250 581,102 617,155
Decrease (Increase) in current Assets
MMKT Accounts (806,288) (176,873) (222,402)
Investments - Trading (6,935,712) 85,514 (128,725)
Accounts Receivable (20,513,628) (35,958,463) 7,429,563
Allowance for Doubtful Accounts 1,578,525 809,166 554,861
Other Receivables 0 (1,400,000) 200,000
Inventory (23,531,507) (51,819,964) 9,360,691
Reserve for Inventory Obsolescence 3,765,000 8,371,103 (1,577,578)
Prepaid Insurance (1,829,143) (1,001,331) 162,752
Prepaid Rent (250,000) 250,000 0
Office Supplies (9,259) (306) 383
Accounts Payable 8,934,591 10,554,275 (6,638,218)
Wages Payable 36,838 227,675 (66,129)
FICA Employee Withholding 1,648 7,804 (2,363)
Medicare Withholding 730 12,055 (3,196)
Federal Payroll Taxes Payable 7,541 124,715 (33,064)
State Payroll Taxes Payable 3,519 58,111 (15,430)
FICA Employer Withholding 1,648 7,804 (2,363)
Medicare Employer Withholding 730 12,055 (3,196)
Income Taxes Receivable/Payable 0 3,205,440 2,806,100
Current Portion LT Note Payable 0 677,640 43,840
Interest payable 0 470,311 98,118 $ 71,438
Bonuses payable 0 504,000 (45,000)
Accum. Depreciation 38,750
Net Cash Flow from Operating Activities (8,933,816) (43,913,083) 20,847,189
Cash flow from Investing Activities
Land (146,250) 15,210 0
Buildings and Land Improvements (779,882) 81,107 (135,000)
Machinery, Equipment, Office Furniture (541,522) (2,739,067) 0
Other Noncurrent Assets (67,301) 67,301 0
Net Cash Flow from Investing Activities (1,534,955) (2,575,449) (135,000)
Cash flow from Financing Activities
Long-Term Note Payable 0 12,762,360 (721,480)
Common Stock 10,131,250 0 0
Paid-in Capital 9,278,750 0 0
Dividends Paid 3,214,851 (6,000,000) (15,250,000)
Line of Credit 12,500,000 39,731,360 (4,749,623)
Net Cash Flow from Financing Activities 35,124,851 46,493,720 (20,721,103) (293,840)
Net increase / Decrease in cash 24,656,080 5,188 (8,914)
Cash Balance - Beginning 0 250,129 255,317
Cash Balance - Ending 24,656,080 255,317 246,403
24,405,951 0 0
Check Figures:
2015 Net Cash from Operating Activities $ 20,775,751 $ 71,438
2014 Net Cash from Investing Activities $ (2,575,449) $ -
2015 Net Increase (Decrease) in Cash $ 213,488 $ 24,442,592
Chester, Inc.
Cash Flow Statement
Year ended December 31,
2014 2015
Cash Flow from Operating Activities
Net Income 20,485,084 8,311,390
Adjustments to reconcile net income to net cash flow from operating activities:
Depreciation Expense 581,102 617,155
Changes in current Assets (80,841,154) 15,779,545
Changes in current Liabilities 15,861,885 (3,860,901)
Net cash used / Provided by operating activities (43,913,083) 20,847,189 71,438
(8,749,233)
Cash flow from Investing Activities
Sale of land 163,618
Purchase of equipment (2,739,067)
Purchase of Building (135,000)
Net cash used by Investing activities (2,575,449) (135,000)
Cash flow from Financing Activities
Payment of dividends (6,000,000) (15,250,000)
Long-Term Note Payable 12,762,360 (721,480)
Line of Credit 39,731,360 (4,749,623)
Net cash used / Provided by Financing activities 46,493,720 (20,721,103) (293,840)
8,572,360
Net Increase / Decrease in cash 5,188 (8,914)
Cash Balance - Beginning 250,129 255,317
Cash Balance - Ending 255,317 246,403

BS Analysis

Complete a Horizontal and Vertical Analysis of the Balance Sheet in this worksheet.
Chester, Inc.
Vertical Analysis
2013 2014 2015
Assets Amount Percentage Amount Percentage Amount Percentage
Current Assets
Cash on Hand 2483 0.00% 2459 0.00% 2511 0.00%
Checking Account - Operating 247646 0.49% 252858 0.19% 243892 0.21%
MMKT Accounts 806288 1.61% 983161 0.74% 1205563 1.03%
Investments - Trading 6935712 13.84% 6850198 5.15% 6978923 5.98%
Accounts Receivable 20513628 40.94% 56472091 42.48% 49042528 42.03%
Allowance for Doubtful Accounts -1578525 -3.15% -2387691 -1.80% -2942552 -2.52%
Other Receivables 0 0.00% 1400000 1.05% 1200000 1.03%
Inventory 23531507 46.96% 75351471 56.68% 65990780 56.56%
Reserve for Inventory Obsolescence -3765000 -7.51% -12136103 -9.13% -10558525 -9.05%
Prepaid Insurance 1829143 3.65% 2830474 2.13% 2667722 2.29%
Prepaid Rent 250000 0.50% 0 0.00% 0 0.00%
Office Supplies 9259 0.02% 9565 0.01% 9182 0.01%
Total Current Assets 48782141 97.35% 129628483 97.50% 113840024 97.56%
Property, Plant & Equipment
Land 146250 0.29% 131040 0.10% 131040 0.11%
Buildings and Land Improvements 779882 1.56% 698775 0.53% 833775 0.71%
Machinery, Equipment, Office Furniture 541522 1.08% 3280589 2.47% 3280589 2.81%
Accum. Depreciation -205000 -0.41% -786102 -0.59% -1403257 -1.20%
Other Noncurrent Assets 67301 0.13% 0 0.00% 0 0.00%
Total Property, Plant & Equipment 1329955 2.65% 3324302 2.50% 2842147 2.44%
Total Assets 50112096 100.00% 132952785 100.00% 116682171 100.00%
Liabilities and Stockholder's Equity
Current Liabilities
Accounts Payable 8934591 17.83% 19488866 14.66% 12850648 11.01%
Wages Payable 36838 0.07% 264513 0.20% 198384 0.17%
FICA Employee Withholding 1648 0.00% 9452 0.01% 7089 0.01%
Medicare Withholding 730 0.00% 12785 0.01% 9589 0.01%
Federal Payroll Taxes Payable 7541 0.02% 132256 0.10% 99192 0.09%
State Payroll Taxes Payable 3519 0.01% 61630 0.05% 46200 0.04%
FICA Employer Withholding 1648 0.00% 9452 0.01% 7089 0.01%
Medicare Employer Withholding 730 0.00% 12785 0.01% 9589 0.01%
Income Taxes Receivable/Payable 0 0.00% 3205440 2.41% 6011540 5.15%
Line of Credit 12500000 24.94% 52231360 39.29% 47481737 40.69%
Current Portion LT Note Payable 0 0.00% 677640 0.51% 721480 0.62%
Interest payable 0 0.00% 470311 0.35% 568429 0.49%
Bonuses payable 0 0.00% 504000 0.38% 459000 0.39%
Dividend payable 6000000 11.97% 15250000 11.47% 15000000 12.86%
Total Current Liabilities 27487245 54.85% 92330490 69.45% 83469966 71.54%
Long term Liabilities
Long-Term Note Payable 0 0.00% 12762360 9.60% 12040880 10.32%
Total Liabilities 27487245 54.85% 105092850 79.05% 95510846 81.86%
Stockholder's Equity
Common Stock 10131250 20.22% 10131250 7.62% 10131250 8.68%
Paid-in Capital 9278750 18.52% 9278750 6.98% 9278750 7.95%
Retained Earnings (Beginning Balance) 3214851 6.42% 8449935 6.36% 1761325 1.51%
Total Stockholder's Equity 22624851 45.15% 27859935 20.95% 21171325 18.14%
Total Liabilities and Stockholder's Equity 50112096 100.00% 132952785 100.00% 116682171 100.00%
Chester, Inc.
Horizontal Analysis
2013 2014 Increase / Decrease 2014 2015 Increase / Decrease
Assets Amount Amount in Amount Percentage Amount Amount in Amount Percentage
Current Assets
Cash on Hand 2483 2459 -24 -0.97% 2459 2511 52 2.11%
Checking Account - Operating 247646 252858 5212 2.10% 252858 243892 -8966 -3.55%
MMKT Accounts 806288 983161 176873 21.94% 983161 1205563 222402 22.62%
Investments - Trading 6935712 6850198 -85514 -1.23% 6850198 6978923 128725 1.88%
Accounts Receivable 20513628 56472091 35958463 175.29% 56472091 49042528 -7429563 -13.16%
Allowance for Doubtful Accounts -1578525 -2387691 -809166 51.26% -2387691 -2942552 -554861 23.24%
Other Receivables 0 1400000 1400000 1400000 1200000 -200000 -14.29%
Inventory 23531507 75351471 51819964 220.22% 75351471 65990780 -9360691 -12.42%
Reserve for Inventory Obsolescence -3765000 -12136103 -8371103 222.34% -12136103 -10558525 1577578 -13.00%
Prepaid Insurance 1829143 2830474 1001331 54.74% 2830474 2667722 -162752 -5.75%
Prepaid Rent 250000 0 -250000 -100.00% 0 0 0
Office Supplies 9259 9565 306 3.30% 9565 9182 -383 -4.00%
Total Current Assets 48782141 129628483 80846342 165.73% 129628483 113840024 -15788459 -12.18%
Property, Plant & Equipment
Land 146250 131040 -15210 -10.40% 131040 131040 0 0.00%
Buildings and Land Improvements 779882 698775 -81107 -10.40% 698775 833775 135000 19.32%
Machinery, Equipment, Office Furniture 541522 3280589 2739067 505.81% 3280589 3280589 0 0.00%
Accum. Depreciation -205000 -786102 -581102 283.46% -786102 -1403257 -617155 78.51%
Other Noncurrent Assets 67301 0 -67301 -100.00% 0 0 0
Total Property, Plant & Equipment 1329955 3324302 1994347 149.96% 3324302 2842147 -482155 -14.50%
Total Assets 50112096 132952785 82840689 165.31% 132952785 116682171 -16270614 -12.24%
Liabilities and Stockholder's Equity
Accounts Payable 8934591 19488866 10554275 118.13% 19488866 12850648 -6638218 -34.06%
Wages Payable 36838 264513 227675 618.04% 264513 198384 -66129 -25.00%
FICA Employee Withholding 1648 9452 7804 473.54% 9452 7089 -2363 -25.00%
Medicare Withholding 730 12785 12055 1651.37% 12785 9589 -3196 -25.00%
Federal Payroll Taxes Payable 7541 132256 124715 1653.83% 132256 99192 -33064 -25.00%
State Payroll Taxes Payable 3519 61630 58111 1651.35% 61630 46200 -15430 -25.04%
FICA Employer Withholding 1648 9452 7804 473.54% 9452 7089 -2363 -25.00%
Medicare Employer Withholding 730 12785 12055 1651.37% 12785 9589 -3196 -25.00%
Income Taxes Receivable/Payable 0 3205440 3205440 3205440 6011540 2806100 87.54%
Line of Credit 12500000 52231360 39731360 317.85% 52231360 47481737 -4749623 -9.09%
Current Portion LT Note Payable 0 677640 677640 677640 721480 43840 6.47%
Interest payable 0 470311 470311 470311 568429 98118 20.86%
Bonuses payable 0 504000 504000 504000 459000 -45000 -8.93%
Dividend payable 6000000 15250000 9250000 154.17% 15250000 15000000 -250000 -1.64%
Total Current Liabilities 27487245 92330490 64843245 235.90% 92330490 83469966 -8860524 -9.60%
Long term Liabilities
Long-Term Note Payable 0 12762360 12762360 12762360 12040880 -721480 -5.65%
Total Liabilities 27487245 105092850 77605605 282.33% 105092850 95510846 -9582004 -9.12%
Stockholder's Equity
Common Stock 10131250 10131250 0 0.00% 10131250 10131250 0 0.00%
Paid-in Capital 9278750 9278750 0 0.00% 9278750 9278750 0 0.00%
Retained Earnings (Beginning Balance) 3214851 8449935 5235084 162.84% 8449935 1761325 -6688610 -79.16%
Total Stockholder's Equity 22624851 27859935 5235084 23.14% 27859935 21171325 -6688610 -24.01%
Total Liabilities and Stockholder's Equity 50112096 132952785 82840689 165.31% 132952785 116682171 -16270614 -12.24%

IS Analysis

Complete a Horizontal and Vertical Analysis of the Income Statement in this worksheet.
Chester, Inc.
Vertical Analysis
2013 2014 2015
Amount Percentage Amount Percentage Amount Percentage
Sales 307,716,148 101.86% 271,839,067 104.79% 288,876,206 108.70%
Sales Returns 5,621,979 1.86% 12,432,247 4.79% 23,110,096 8.70%
Net Sales 302,094,169 100.00% 259,406,820 100.00% 265,766,110 100.00%
Cost of Goods Sold 176,961,437 58.58% 161,029,981 62.08% 179,103,248 67.39%
Gross Profit 125,132,732 41.42% 98,376,839 37.92% 86,662,862 32.61%
Operating Expense
Administrative Wages Expense 21,094,132 6.98% 18,344,399 7.07% 19,706,506 7.41%
Advertising Expense 1,121,425 0.37% 1,161,276 0.45% 1,058,391 0.40%
Auto Expenses 261,218 0.09% 235,763 0.09% 214,001 0.08%
Bad Debt Expense 2,028,032 0.67% 5,875,403 2.26% 13,900,800 5.23%
Bonus Expense 0 0.00% 504,000 0.19% 459,000 0.17%
Depreciation Expense 166,250 0.06% 581,102 0.22% 617,155 0.23%
Freight 5,378,689 1.78% 4,749,095 1.83% 4,325,068 1.63%
Insurance Expense 1,067,428 0.35% 1,045,085 0.40% 951,774 0.36%
Legal and Professional Expense 4,506,417 1.49% 11,037,039 4.25% 8,987,069 3.38%
Maintenance Expense 76,420 0.03% 96,020 0.04% 87,641 0.03%
Miscellaneous Office Expense 21,279 0.01% 27,803 0.01% 25,390 0.01%
Payroll Tax Expense 1,938,736 0.64% 1,767,149 0.68% 1,609,342 0.61%
Pension/Profit-Sharing Plan Ex 3,750,000 1.24% 3,696,000 1.42% 3,366,000 1.27%
Phone 95,467 0.03% 57,911 0.02% 53,651 0.02%
Postal 160,042 0.05% 87,140 0.03% 79,360 0.03%
Property Tax Expense 100,619 0.03% 110,252 0.04% 101,319 0.04%
Rent or Lease Expense 3,254,357 1.08% 1,370,273 0.53% 2,230,615 0.84%
Research and Development 38,639,554 12.79% 532,425 0.21% 3,080,313 1.16%
Utilities 169,554 0.06% 170,765 0.07% 155,600 0.06%
Warehouse Salaries 5,791,730 1.92% 5,848,120 2.25% 5,270,689 1.98%
Warranty Expense 1,375,352 0.46% 1,297,104 0.50% 1,422,381 0.54%
Total Operating Expenses 90,996,701 30.12% 58,594,124 22.59% 67,702,065 25.47%
Income Before Other Gains and Losses 34,136,031 11.30% 39,782,715 15.34% 18,960,797 7.13%
Other Gains and Losses
Interest Expense 1,093,750 0.36% 3,373,056 1.30% 2,942,147 1.11%
Income from Investments (665,079) -0.22% (658,672) -0.25% (549,387) -0.21%
Unrealized (Gains) and Losses - Investments 64,288 0.02% 85,514 0.03% (128,725) -0.05%
Interest Income (255,379) -0.08% (147,707) -0.06% (142,168) -0.05%
Total Other Gains and Losses 237,580 0.08% 2,652,191 1.02% 2,121,867 0.80%
Income before Income tax 33,898,451 11.22% 37,130,524 14.31% 16,838,930 6.34%
Income tax expenses
Income Tax Expense - Federal 2,956,250 0.98% 14,142,240 5.45% 7,269,540 2.74%
Income Tax Expense - State 536,250 0.18% 2,503,200 0.96% 1,258,000 0.47%
Net Income 30,405,951 10.07% 20,485,084 7.90% 8,311,390 3.13%
Loss on Legal Settlement 23,965,000 7.93% 0 0.00% 0 0.00%
Income transferred to Retained earnings 6,440,951 2.13% 20,485,084 7.90% 8,311,390 3.13%
Chester, Inc.
Horizontal Analysis
2013 2014 Increase / Decrease 2014 2015 Increase / Decrease
Amount Amount in Amount Percentage Amount Amount in Amount Percentage
Sales 307,716,148 271,839,067 (35,877,081) -11.66% 271,839,067 288,876,206 17,037,139 6.27%
Sales Returns 5,621,979 12,432,247 6,810,268 121.14% 12,432,247 23,110,096 10,677,849 85.89%
Net Sales 302,094,169 259,406,820 (42,687,349) -14.13% 259,406,820 265,766,110 6,359,290 2.45%
Cost of Goods Sold 176,961,437 161,029,981 (15,931,456) -9.00% 161,029,981 179,103,248 18,073,267 11.22%
Gross Profit 125,132,732 98,376,839 (26,755,893) -21.38% 98,376,839 86,662,862 (11,713,977) -11.91%
Operating Expense
Administrative Wages Expense 21,094,132 18,344,399 (2,749,733) -13.04% 18,344,399 19,706,506 1,362,107 7.43%
Advertising Expense 1,121,425 1,161,276 39,851 3.55% 1,161,276 1,058,391 (102,885) -8.86%
Auto Expenses 261,218 235,763 (25,455) -9.74% 235,763 214,001 (21,762) -9.23%
Bad Debt Expense 2,028,032 5,875,403 3,847,371 189.71% 5,875,403 13,900,800 8,025,397 136.59%
Bonus Expense 0 504,000 504,000 504,000 459,000 (45,000) -8.93%
Depreciation Expense 166,250 581,102 414,852 249.54% 581,102 617,155 36,053 6.20%
Freight 5,378,689 4,749,095 (629,594) -11.71% 4,749,095 4,325,068 (424,027) -8.93%
Insurance Expense 1,067,428 1,045,085 (22,343) -2.09% 1,045,085 951,774 (93,311) -8.93%
Legal and Professional Expense 4,506,417 11,037,039 6,530,622 144.92% 11,037,039 8,987,069 (2,049,970) -18.57%
Maintenance Expense 76,420 96,020 19,600 25.65% 96,020 87,641 (8,379) -8.73%
Miscellaneous Office Expense 21,279 27,803 6,524 30.66% 27,803 25,390 (2,413) -8.68%
Payroll Tax Expense 1,938,736 1,767,149 (171,587) -8.85% 1,767,149 1,609,342 (157,807) -8.93%
Pension/Profit-Sharing Plan Ex 3,750,000 3,696,000 (54,000) -1.44% 3,696,000 3,366,000 (330,000) -8.93%
Phone 95,467 57,911 (37,556) -39.34% 57,911 53,651 (4,260) -7.36%
Postal 160,042 87,140 (72,902) -45.55% 87,140 79,360 (7,780) -8.93%
Property Tax Expense 100,619 110,252 9,633 9.57% 110,252 101,319 (8,933) -8.10%
Rent or Lease Expense 3,254,357 1,370,273 (1,884,084) -57.89% 1,370,273 2,230,615 860,342 62.79%
Research and Development 38,639,554 532,425 (38,107,129) -98.62% 532,425 3,080,313 2,547,888 478.54%
Utilities 169,554 170,765 1,211 0.71% 170,765 155,600 (15,165) -8.88%
Warehouse Salaries 5,791,730 5,848,120 56,390 0.97% 5,848,120 5,270,689 (577,431) -9.87%
Warranty Expense 1,375,352 1,297,104 (78,248) -5.69% 1,297,104 1,422,381 125,277 9.66%
Total Operating Expenses 90,996,701 58,594,124 (32,402,577) -35.61% 58,594,124 67,702,065 9,107,941 15.54%
Income Before Other Gains and Losses 34,136,031 39,782,715 5,646,684 16.54% 39,782,715 18,960,797 (20,821,918) -52.34%
Other Gains and Losses
Interest Expense 1,093,750 3,373,056 2,279,306 208.39% 3,373,056 2,942,147 (430,909) -12.78%
Income from Investments (665,079) (658,672) 6,407 -0.96% (658,672) (549,387) 109,285 -16.59%
Unrealized (Gains) and Losses - Investments 64,288 85,514 21,226 33.02% 85,514 (128,725) (214,239) -250.53%
Interest Income (255,379) (147,707) 107,672 -42.16% (147,707) (142,168) 5,539 -3.75%
Total Other Gains and Losses 237,580 2,652,191 2,414,611 1016.34% 2,652,191 2,121,867 (530,324) -20.00%
Income before Income tax 33,898,451 37,130,524 3,232,073 9.53% 37,130,524 16,838,930 (20,291,594) -54.65%
Income tax expenses
Income Tax Expense - Federal 2,956,250 14,142,240 11,185,990 378.38% 14,142,240 7,269,540 (6,872,700) -48.60%
Income Tax Expense - State 536,250 2,503,200 1,966,950 366.80% 2,503,200 1,258,000 (1,245,200) -49.74%
Net Income 30,405,951 20,485,084 (9,920,867) -32.63% 20,485,084 8,311,390 (12,173,694) -59.43%
Loss on Legal Settlement 23,965,000 0 (23,965,000) -100.00% 0 0 0
Income transferred to Retained earnings 6,440,951 20,485,084 14,044,133 218.04% 20,485,084 8,311,390 (12,173,694) -59.43%

Ratios

Calculate and Present at least three Liquidity, Solvency and Profitability Ratios in this Worksheet
2013 2014 2015
Liquidity Ratios
Current Ratio = Current Assets / Current Liabilities
1.77 1.40 1.36
Quick Ratio = (Current Assets – Inventories) / Current Liabilities
0.98 0.69 0.67
Times Interest Earned Ratio = Income before Interest and Income tax / Interest expense
31.99 12.01 6.72
Solvency Ratios
Debt to total assets Ratio Total Liabilities / Total Assets
0.55 0.79 0.82
Debt to total Equity Ratio Total Liabilities / Stockholder's equity
1.21 3.77 4.51
Long Term Debt/Equity Ratio = Long Term Debt / Shareholders Equity
0.00 0.46 0.57
Profitabilty ratios
Earnings per share = (Net income - Preferred stock dividend) / Average common shares outstanding
$34.75 $23.41 $9.50
Profit Margin = Net Income / Net sales
10.07% 7.90% 3.13%
Return on Assets = Net Income / Total Assets
60.68% 15.41% 7.12%