Ratio analysis

ACG 2071 Managerial Accounting

Process Costing Systems

Minicase

Jeffersonian Corporation has been in business for over 50 years. The company is looking to expand

operations into the Pacific Rim and would like an analysis of its financial statements to be prepared.

Review the financial statements below:

Jeffersonian Corporation Comparative Income Statement For years ended December 31, 2011 and 2010

2011 2010

Sales $ 2,486,000.00 $ 2,075,000.00

Cost of goods sold $ 1,523,000.00 $ 1,222,000.00

Gross Profit $ 963,000.00 $ 853,000.00

Operating Expenses Salaries Expense $ 145,000.00 $ 100,000.00

Contract Labor Expense $ 240,000.00 $ 280,000.00

Insurance Expense $ 165,000.00 $ 200,000.00

Supplies expense $ 100,000.00 $ 45,000.00

Depreciation Expense $ 26,000.00 $ 35,000.00

Miscellaneous expense $ 85,000.00 $ 75,000.00

Marketing and Promotion expense $ 17,000.00 $ 15,000.00

Total operating expenses $ 778,000.00 $ 750,000.00

Operating Income $ 185,000.00 $ 103,000.00

Interest expense $ 44,000.00 $ 46,000.00

Income before taxes $ 141,000.00 $ 57,000.00

Income taxes $ 47,000.00 $ 19,000.00

Net Income $ 94,000.00 $ 38,000.00

ACG 2071 Managerial Accounting

Process Costing Systems

Minicase

Jeffersonian Corporation Comparative Balance Sheet For years ended December 31, 2011 and 2010

2011 2010

Assets Current Assets Cash $ 79,000.00 $ 42,000.00

Marketable Securities $ 65,000.00 $ 96,000.00

Accounts receivable $ 120,000.00 $ 100,000.00

Merchandise inventory $ 250,000.00 $ 265,000.00

Total current assets $ 514,000.00 $ 503,000.00

Fixed Assets Store Equipment, net $ 400,000.00 $ 350,000.00

Office Equipment, et $ 45,000.00 $ 50,000.00

Building, net $ 625,000.00 $ 675,000.00

Land $ 100,000.00 $ 100,000.00

Total fixed assets $ 1,170,000.00 $ 1,175,000.00

Total assets $ 1,684,000.00 $ 1,678,000.00

Liabilities Current Liabilities Accounts payable $ 164,000.00 $ 190,000.00

Short term Liabilities $ 75,000.00 $ 90,000.00

Taxes payable $ 26,000.00 $ 12,000.00

Total current liabilities $ 265,000.00 $ 292,000.00

Long-term liabilities Mortgage payable $ 400,000.00 $ 420,000.00

Total liabilities $ 665,000.00 $ 712,000.00

Stockholder's Equity Common Stock, $5 par value $ 475,000.00 $ 475,000.00

Retained earnings $ 544,000.00 $ 491,000.00

Total stockholder's equity $ 1,019,000.00 $ 966,000.00

Total $ 1,684,000.00 $ 1,678,000.00

ACG 2071 Managerial Accounting

Process Costing Systems

Minicase

REQUIRED:

1. Prepare comparative income statements for year 2011 in comparison to year 2010.

2. Prepare common-size comparative balance sheet for years 2011 and 2010

3. Compute the following ratios for 2011.

Current ratio Profit margin ratio

Acid-test ratio Total asset turnover Accounts receivable turnover

Return on total assets Days’ sales uncollected Earnings per share Inventory turnover Price earnings ratio Debt-to-equity ratio Dividend yield Times interest earned